Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Copa Holdings SA (NYSE:CPA)
Q3 2020 Earnings Call
Nov 19, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings Third Quarter Earnings Call. [Operator Instructions] As a reminder, this call is being webcast and recorded on November 19, 2020.

Now I will turn the conference over to Raul Pascual, Director of Investor Relations. Sir, you may begin.

Raul Pascual -- Director of Investor Relations

Thank you, Sara, and welcome everyone to our third 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 the actions the company has taken to mitigate the impact of the COVID-19 crisis and the restart of our operations, followed by Jose, who will discuss our financial results. Immediately after, we will open up 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, IFRS financial measures can be found in our earnings release, which have been posted on the company's website copa.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 -- Chief Executive Officer and Director

Thank you, Raul. Good morning to all and thanks for participating in our third quarter earnings call. I hope all of you and your families are doing well and staying safe. Before we begin, I'd like to thank all our co-workers for their commitment to the company and recognize our continuous efforts and many sacrifices during these difficult times. To them, as always, my utmost respect and admiration. As expected, given government restrictions in the region related to the COVID-19 pandemic, we were not able to provide service for the first 45 days of the quarter.

On August 14, after five months of virtually no operations, Copa was allowed by the Government of Panama to start operations with restrictions on the number of flights and the entry into Panama of non-citizens and non-residents. We began with a twice a week operations serving eight destinations. Since then, the company has been gradually spooling up its network, restarting destinations and adding frequencies as quickly as the easing of restrictions on air [Phonetic] travel demand has permitted.

We ended the quarter with service to 15 destinations. Although September only amounted to 3% of pre-crisis capacity, the gradual restart of flights allowed us to become even more proficient in the new more complex operating procedures and enhanced by our safety protocols and to demonstrate our readiness to operate safely and reliably.

On October 11, the Panamanian government restrictions on non-citizens, non-residents and number of flights were lifted, which, as expected, had a positive effect on our ability to continue both building up the network, ending the month with service to 30 destinations, representing close to 15% of ASMs compared to October 2019.

We project to end the year having restarted service for more than 50 destinations, and plan to operate in December approximately 40% of 2019's capacity. In August and September, while the restrictions and inbound Panama traffic were still in place, load factors were approximately 60%. In October, after the above-mentioned restrictions were lifted, we saw healthier loads, approaching 70% for the entire month. Based on the strong traffic over the past three months and the bookings we're receiving for the near future, we believe the demand will be able to sustain our current capacity plan for the remainder of 2020.

In terms of financial results, with only 1.5% of our pre-crisis capacity, which was a very challenging third quarter, we recorded a net loss, excluding special items of $121.6 million, making this our second quarterly loss on an underlying basis in 20 years with the other being the second quarter of this year. However, by exercising great cost discipline and better-than-expected sales and refunds performance in the quarter, we were able to keep our cash consumption well below our original expectations to about $36 million per month. Despite encouraging progress and the vaccine development efforts, we continued preparing for what we believe will be a challenging 2021, as our region could still be subject to new infection rates with the possibility of further travel restrictions and a weakening demand environment, especially, while we wait for the vaccines to become widely available. That being the case, we have taken many steps to strengthen the company and maintain one of the strongest financial positions in the industry.

As of today, we have adjusted the size of the company to better match our future capacity and continue working on cost reduction efforts, as we believe, keeping a competitive cost structure and a strong financial position will keep us among the best procurements to come out ahead once this crisis is over. We have delivered the first four Embraer aircraft to a new owner [Phonetic] and expect to have delivered the entire fleet by June 2021. We signed a Letter of Intent to sell the first two Boeing 737-700s and continue actively marketing the remaining 12 aircraft. We have a plan in place to comply with all new requirements and return our six Boeing 77 MAX 9 aircraft to service, allowing us to offer a more competitive product in our longer segment. We are also in advanced discussions with Boeing and expect to reach a settlement agreement soon.

Regarding our expiring leases, we have agreed to extend some of our leases and are powered by the hour basis [Phonetic], which adds even more flexibility to our fleet plan in case the market recovers faster than expected. And in terms of liquidity, we obtain new credit facilities for an aggregate amount of $155 million, bringing our total committed undrawn credit facilities to $305 million, and total available liquidity to $1.3 billion at the end of the quarter.

Lastly, I'd like to reiterate that we have a proven and very strong business model, which is based on operating the best and most convenient network for intra-Latin America travel from our Hub of the Americas [Phonetic], leveraging Panama's advantageous geographic position with the region's lowest unit cost for a full-service carrier, based on time performance and strongest balance sheet. Going forward, the company expects that its Hub of the Americas will be an even more valuable source of strategic advantage. It's likely that fewer intra-Latin America markets will be able to sustain direct point-to-point service. So we believe the Hub of the Americas will be the best position to serve this market.

Now I will turn it over to Jose, who will go over our financial results in more detail.

Jose Montero -- Chief Financial Officer

Thank you, Pedro. Good morning, everyone. I hope that you and your families are safe and doing well. Thanks for being with us today. I'd like to join Pedro acknowledging our great Copa team for all their efforts and great team spirit during these very challenging times. As Pedro mentioned, we restarted scheduled commercial service in mid-August and has slowly been spooling up capacity ever since.

For the third quarter, the contribution from these operations were still very modest as we only operated about 1.5% of the capacity compared to the same period last year. Nonetheless, we finally started flying again, and we've put a lot of effort into rebuilding our hub and look forward to having more substantial operations in the fourth quarter.

Looking at third quarter results, we reported a net loss of $118.1 million or a loss of $2.78 per share. Excluding special items, mainly realized $3.6 million mark-to-market gain related to the convertible notes, we would have reported a net loss of $121.6 million or a loss of $2.86 per share. Our cash consumption for the second quarter came in at $36 million per month. This excludes $22 million in proceeds mainly related to tax credit reimbursements as well as the sale of one Embraer-190 aircraft. It also excludes a $50 million payment we made in the short-term credit line. This cash consumption is significantly lower than our prior estimates as we delivered more savings than planned and generated higher proceeds from sales and lower cash refunds than we originally expected.

In terms of capacity for the remainder of the year, we expect to continue spooling up our operations. October came in at approximately 15% of October 2019 capacity and we expect November and December to help post 30% and 40% respectively year-over-year. Assuming this gradual spool up of operations, we should be able to keep our cash consumption to about $25 million per month for the fourth quarter of the year. This figure assumes that our leased aircraft and debt commitments are paid in full, but we stay current in all of our obligations or not including the proceeds from aircraft sales. The improvement in our cash consumption estimate for the remainder of the year is a function of our sharp focus on the reduction of our cost base as well as improving sales figures, which are on pace with the projected spool of our operations.

I'm going to spend some time now discussing our balance sheet and liquidity. As of the end of the third quarter, assets totaled $3.9 billion. Owners equity was almost $1.5 billion. Our debt plus our lease liabilities totaled $1.5 billion. Our lease liability adjusted net debt-to-EBITDA ratio came in at 2.3 times. We closed the quarter with approximately $1.2 billion in debt. As I mentioned before, during the quarter, we repaid $50 million of our short-term credit facilities and currently, all of our committed credit facilities remain undrawn. As to cash, short and long-term investments, we closed the quarter with $1 billion. During the quarter, we took many steps to further strengthen our liquidity position. As previously reported, in the month of July, we closed a secured revolving credit facility for a initial aggregate amount of $105 million. And in the month of August, we established a new unsecured committed facility for $50 million, which remains undrawn. Including these and other previously established facilities, the company ended the quarter with an aggregate amount of $305 million in unutilized committed credit facilities, which added to our cash equates to more than $1.3 billion in total available liquidity.

During the quarter, we finalized the sale and delivery of the first of 14 Embraer-190 aircraft. As of today, we have delivered three additional Embraer aircraft and expect to have delivered the entire fleet by June 2021. This month, we also signed an LOI for the sale of two Boeing 737-700s, which we expect to deliver during the month of January of 2021.

Aside from the new 190 and 737-700 fleets, which are classified in our balance sheet as assets held for sale, we ended the quarter with 74 aircraft, 68 737-800s and six MAX9s. During the month of December, we expect to receive two MAX9 aircraft to end the year with a fleet of 76 aircraft. Including these figures our 16 737-800s, which will remain in temporary storage.

Let me close by stating that once this most challenging situation passes, we do believe Copa [Indecipherable] the Americas, will remain as a best connecting points for travel in the region with a privilege location and even more efficient business model with lower costs and the best team in the industry. Thank you.

And with that, we'll open the call for some questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Duane Pfennigwerth with Evercore ISI. Your line is now open.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Hi guys. How are you?

Pedro Heilbron -- Chief Executive Officer and Director

Hi, Duane.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Can you talk -- what percentages of your markets are open now? Not necessarily the markets that you're flying because that could be a subset of that, but what percentages of your markets are -- are you technically able to fly to? And then, generally speaking, what are the entry requirements, for example, you have to present with a negative cash or whatever, what are the entry requirements? And can you highlight any recent changes? So just to give us a sense for the number of markets that are reopening and what sort of entry requirements are in place?

Pedro Heilbron -- Chief Executive Officer and Director

Okay, Duane. This is Pedro. So one of the challenges we are all facing -- and when I say we are all, I'm meaning like aviation worldwide, is that countries are all over the place in terms of their entry requirements. So in terms of open market, I would say most of them are opened in one way or another, mostly are 100% opened just orders that are restricting the number of flights that are allowed in or restricting slots, for example, Colombia is restricting the number of flights per hour. So there are only so many flights available. And other countries are still restricting the entry of nationals and residents versus foreigners or visitors. And some countries are requesting a PCR negative test within 72 hours. Orders have recently lifted that restriction like Costa Rica and Colombia. So it's all over the place, again, but I would say, in summary, most countries are opened.

Duane Pfennigwerth -- Evercore ISI -- Analyst

And then I totally appreciate its early days here, but is there any relative trends you could highlight markets where maybe you've been surprised at the level of demand recovery in a positive way versus -- markets that remain very restrictive? And thanks for taking the questions.

Pedro Heilbron -- Chief Executive Officer and Director

Yeah. It's hard to tell. Once the new market opens, well, it's not a new market, but once the market reopens, there's always pent-up demand that needs to be satisfied. It's usually VFR air traffic since people needing to get back or visit families or personal reasons in general. So I would say, no big surprises there. We're starting to see leisure traffic picking up a little like from South America to the Caribbean. Obviously it's a fraction of what it used to be, but it's starting to pick up a little. And all the business traffic is the weakest right now, we also starting to see companies and a company that needs to get their executives back in the year visiting their markets. And so there is a little bit of that starting, but it's mostly VFRs there.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Thank you.

Jose Montero -- Chief Financial Officer

Thank you, Duane.

Operator

Thank you. Our next question comes from the line of Alejandro Zamacona with Credit Suisse. Your line is now open.

Alejandro Zamacona -- Credit Suisse -- Analyst

Hello, Pedro, Jose, Raul. Thank you for the call. And thank you for taking my questions. And on the cash burn management, during the second quarter you reported that only cash burn of $77 million. For this third quarter, we saw a monthly cash burn of $36 million. So it's a significant improvement. So I'm curious on what's behind the significant increase or what additional initiatives are you deploying to deliver this improvement? Thank you.

Jose Montero -- Chief Financial Officer

Yeah, Alejandro, this is Jose. There is, I would say three components to the improvement that we saw in our consumption of cash for the third quarter. The first one is, of course, costs. We've been very focused since the onset of the crisis in reducing our cost to the greatest extent in negotiating all the contracts that we had. We have also made -- frankly reduced the size of the company to match the size of the new reality that we expected. And this was done through offering packages for a subset of our employees and an offering also voluntary leaves for employees as well.

But in essence, we looked at every single cost base, and I think that we've been able to accelerate some of the improvements that we initially expected or have been seeing in the second quarter into the third quarter and beyond. The second one is our -- we've seen, I think, a reduced number of cash refunds than we expected. And that I think is a function of the policies that we set in place for to flexibly -- make more flexible the travel we make for our customers and that has resulted, I think, in a significant reduction in our ATL refund reduction.

And then finally, we are seeing better than expected sales coming in during the quarter. And I'd say those are the three main sort of levers for improvement, and also our improvement going into the fourth quarter as well.

Alejandro Zamacona -- Credit Suisse -- Analyst

Okay. Thank you. Very clear. And if I may be, second question, just -- can you give a quick update on the densification plan announced in the last Investor Day?

Pedro Heilbron -- Chief Executive Officer and Director

Yeah. It's Pedro here. With the pandemic, our investments were pretty much frozen on that of an essential nature. So those are projects that we have to take up again. And we're starting to talk about those projects. So that was stood in three and we haven't really done much. We went into lowering capex and saving cash. But is -- and, of course, load factors are down and demand is weaker. So we don't have the same necessity to rush into higher density planes. But I think that will happen eventually. And we'll take it up again, but that was delayed.

Alejandro Zamacona -- Credit Suisse -- Analyst

Okay. Thank you very much.

Jose Montero -- Chief Financial Officer

Thank you, Alejandro.

Operator

Thank you. Our next question comes from the line of Savi Syth with Raymond James. Your line is now open.

Matt Roberts -- Raymond James -- Analyst

Hey, good morning, everyone. This is actually Matt on for Savi. I appreciate the color you provided with expectations in 4Q demand spooling up with capacity. But, could you maybe provide a longer term look? I know we've got a lot of vaccine news out recently as well. But what are some of the potential capacity recovery paths that you're considering for 2021?

Pedro Heilbron -- Chief Executive Officer and Director

Yeah. So it's one of the most difficult things right now, is talking long term, because the booking curve has to shorten and we are navigating unchartered waters. It's all new. But there are, of course, very encouraging news with the vaccines are coming out. So it seems like there is a bright light at the end of this tunnel. And there will be a point hopefully soon when it's going to be a lot easier to predict future demand. However, for December, for the end of this year, in the month of December, we are talking now about 40% of ASMs versus 2019. While in the previous call, we were talking of a range between 30% and 40%. So we're in the upper side of that range. And that's a good sign. And as I mentioned, our bookings support that ASM levels. So our booking makes us believe that we can sustain those ASMs with a decent load factors. And we think that from, then on, while we hope from then on to build our ASMs gradually as the demand allows us. But January will be a little bit better than December in terms of ASMs and not a lot, but a little bit better. Beyond January bookings are not strong enough to know. And there is so much uncertainty out there with the virus and everything else. That's very difficult for us to say anything beyond January.

Jose Montero -- Chief Financial Officer

I would say that you could argue that it's going to be in that range of time that Pedro just mentioned somewhere in the low 40s of pre-COVID capacity. I would say that there other component of that is simply for us to maintain our flexibility. And I think that we have been working quite a bit in terms of flexibility that we have in 2021. But it is too premature as you could probably imagine to say anything related to the full year of 2021.

Matt Roberts -- Raymond James -- Analyst

Certainly. Anybody's guess to that. I appreciate the color nonetheless. And for my second question, if -- looking at your fleet plan, it seems like that the two additional MAXs coming in December and five remaining, but not yet delivered, its seems like you can get back to just about 95% in 2019 capacity in 2021, if you wanted to. So could you provide a little bit more detail around your expectations, around the 800s? I know you said you had some of them on the [Indecipherable] power buyer agreements. Could you maybe talk about redelivery expectations? Or just some more color on the duration of those [Indecipherable] power buyer agreements any way that pertains to?

Jose Montero -- Chief Financial Officer

Yeah. There has been a -- some negotiations that we've been making over the last couple of months with some of our leased airplanes. They give us a lot of flexibility because that flexibility kicks right away. So we extended some of the expiring leases that we have for in the 2021 range. And actually over the next two years, we have about 11 leased airplanes that are going out. And so we can gain some flexibility with these [Indecipherable] agreements that we are doing. Having said that, in terms of number of aircraft that you could expect for next year, at the end of the year, it will be in the mid '80s in terms of total number of aircraft. And so as I mentioned in, I think, my prepared remarks, there is a portion of them are going to be in storage. So I think there's going to be a range of possibilities in terms of the available number of aircraft that we have in the network for next year, depending on how the man ultimately behaves.

Pedro Heilbron -- Chief Executive Officer and Director

And we -- just to add to that, we have a sizable order for MAX aircraft. And I'm sure we can work with Boeing if there is a need to change the delivery date. I mean there always be the production issues. But we think we have enough flexibility with the leased aircraft, the expiring leases that could be renewed, the powered by the hour, the third aircraft and our March -- our MAX order where we can adjust capacity as needed. And it could be upwards or downwards depends -- depending on how the market behaves. So that's -- I think that -- that's one thing we've been able to manage very well.

Matt Roberts -- Raymond James -- Analyst

Well, thank you all very much.

Jose Montero -- Chief Financial Officer

Thanks, Matt.

Operator

Thank you. Our next question comes from the line of Helane Becker with Cowen. Your line is now open.

Helane Becker -- Cowen -- Analyst

Thanks very much, operator. Hi everybody and thank you very much for the time. Not sure you can talk about this. But is there a specific sticking point with respect to the negotiations with Boeing? Or is it just taking a long time because it's hard to get back and forth?

Pedro Heilbron -- Chief Executive Officer and Director

Yeah, there is no sticking point. And yeah, I mean, it's just the way it's happened. It's not -- it may be -- neither side has been in that. In a big rush, it's not like we needed a money to survive and we want to reach to the right deal knowing when the airplanes were going to be back in service so that facilitate same. So not just the weights work, it's -- yeah, I don't think I have much to add to that.

Helane Becker -- Cowen -- Analyst

Okay. Well, that's a fair response actually. And then I was just wondering if you could talk about what you need to do to return the MAX to service, now that the US FAA approved it. Can you just maybe update us on what has to happen now?

Pedro Heilbron -- Chief Executive Officer and Director

Yeah. We have -- you know we have six MAXs in Panama, grounded in Panama, and then there seven that were build but not delivered. Those are somewhere in Seattle. And we expected to be flying -- at least two of our six MAXs by the end of this year. That's our expectation right now. And there is a series of, let's say, technical matters like upgrading the new software -- uploading the new software that it only takes a few hours, if we have to retrain pilots because they haven't flown the airplanes for a while. However, I should say that the new training requirements are basically the same that we were doing before the aircraft was grounded. Copa had always done more than what was the minimum required. We had the MAX simulator. We're doing the simulator sessions. So the new requirements are basically the same we're doing before. That's not a problem. But we have to put the pilots through that training program again. Then maintenance wise, it's going to take us like about two weeks per aircraft to bring them up to the right maintenance level, which includes doing a few air flights without passengers, a few test flights without passengers to make sure all are out. When a flight -- when an airplane has been grounded for nearly two years and that's no whether built for, there's a lot of maintenance work, even though we've been serving them following a Boeing's recommendation.

Jose Montero -- Chief Financial Officer

And one thing I'll add there Helane as well is that, Panama's Aviation Authority as well as the FAA has issued. So from the regulatory standpoint, that's something that facilitates also the process was that this has been lifted by the FAA as well.

Helane Becker -- Cowen -- Analyst

Okay. Thanks, Jose. I really appreciate that. Thanks, Pedro for your detailed response. Have a nice day, guys.

Jose Montero -- Chief Financial Officer

Thank you, Helane.

Pedro Heilbron -- Chief Executive Officer and Director

Thank you, Helane.

Operator

Thank you. Our next question comes from the line of Hunter Keay with Wolfe Research. Your line is now open.

Hunter Keay -- Wolfe Research -- Analyst

Hey, good morning everybody.

Pedro Heilbron -- Chief Executive Officer and Director

Good morning.

Hunter Keay -- Wolfe Research -- Analyst

Thanks for getting me on. So on costs -- you've shown an impressive amount of variability as you've been cutting capacity. And how do you think about those coming back as you slowly add capacity back? I mean, I'm trying to think about the balance here between what's been sort of deferred and what's truly variable in nature, and then thinking about maybe incremental efficiencies that you could drive from some operating leverage? It's really, ultimately just a question about when we can start talking about that sub-6 CASM number again. So, any color on that would be appreciated.

Pedro Heilbron -- Chief Executive Officer and Director

Okay, Hunter. So it's Pedro here. I'll start to give Jose a little it of time. But first thing I should say that we haven't deferred any costs, and that's very important. The costs we're showing are our complete costs for the month, for the quarter. Nothing is going to come back to buy that later on. And no leases, no, nothing, we're paying for everything. We've renegotiated a bunch of fixed costs, payroll, number of contracts, we have brought down our fixed cost as Jose mentioned before. And then, of course, there is a variable costs that are down because of volumes. So we expect better ASMs come back our, unit costs, of course, are going to improve and our plan and the way we have approached this crisis is that when it's -- when everything is over, we are not sure what's going to be our side and how long it's going to take us to get back to 2019 levels. But we want to make sure that we can be as successful as before even before we get back to 100%, which means that we need a lower fixed cost base to be able to accomplish that. And I think -- we're there already.

Jose Montero -- Chief Financial Officer

Yeah. Hunter, we guide the way that I'm seeing it is that when we are back to 80% of free coal capacity, again, we will be back at the CASM that we had back in May last year. So I think that we have found significant levels of efficiencies in this exercise that we've been making over the last several months. And so we are, I think, in a good place right now in terms of costs that's not going to come in while the ASMs are still at a relatively low level. But once the ASMs are again back to around that level, some 80% of pre-COVID levels will be achieving our sort of around six CASM [Indecipherable] next fuel that we were embarked on before.

Hunter Keay -- Wolfe Research -- Analyst

Well, thank you. And then you mentioned a little bit of green shoots on corporate travel, obviously, it's very early, but I also think you mentioned previously that about a third of your volume was corporate travel before. Is that true -- is it a third of your volume? And then the second, sort of component of that question is, when will you know how your corporates are thinking about their 2021 spend? Or is that a January conversation or you're having those conversations now? Because I would imagine there should be some degree of visibility on how your corporate -- restructured corporate stuff should spool throughout the year.

Pedro Heilbron -- Chief Executive Officer and Director

Yeah. So I'll start with the second part. So we have started with conversations, but our corporate accounts don't really know what their travel plans will be for the next years. And -- but in most cases people want to get back in the air. It may not be to the same degree as before, but pretty much everyone wants to get back in year and get -- get back to doing their regular business. And I think that also applies to people have been locked at home for so many months that want to go out and travel for leisure or visiting friends and family. So, but in terms of our traffic, the way we've grown in the recent past, we've ended up in, I would say, a third VFR, a third leisure and a third business, not just corporate, but the business. Corporate is much larger than business in general. In Latin America, it's not everything -- business means that it's corporate. There are smaller companies that don't have corporate accounts, but it's a [Indecipherable].

Hunter Keay -- Wolfe Research -- Analyst

Thank you.

Operator

Thank you. Our next question comes from the line of Rogerio Araujo with UBS. Your line is now open.

Rogerio Araujo -- UBS -- Analyst

Yeah, hey guys, thanks a lot for the opportunity. A couple of questions here. The first one, is it too early to map out opportunities left by competitors that are shrinking capacity, some of Copa's market, and kept domestic market in Colombia become more relevant in the future. So, we saw already like back ago the Colombia domestic market was pretty relevant to the company and this has reduced over time, and to your broad Wingo. So, could this be an opportunity? And any other potential opportunities left by the market? That's my first question. Thank you.

Pedro Heilbron -- Chief Executive Officer and Director

Right. So the -- it's early to tell. Every airlink is pulling up at a different pace for different reasons, including restrictions in their home markets, et cetera. So it's very, very hard to tell right now, which opportunities are going to be left opened in the future. But we do believe that a number of markets will not be large enough to sustain direct point-to-point service as it was the case before. Those -- I mean it's -- pretty much every market will be reduced for the next few years. So it's a number of markets are going to fall below that minimum level for direct point-to-point. So there will be some opportunities for the hub to having more value, but it's early to know. In terms of Colombia domestic and Wingo -- I think Wingo will remain opportunistic. That's a very competitive market. So we don't see Wingo just is going wild and trying to grow with aggressiveness. I think we remain opportunistic and careful in how much we grow and where we grow. But Wingo did get a fifth airplane recently. We have extra airplanes that we don't need right now. So they got a fifth plane and they will get a sixth plane by the end of the year, so in a few months, so actually in a month. So they have extra capacity, but they will deploy that capacity, again, as I mentioned before with a lot of care where it makes sense. And even if their utilization is down for a while, we're fine with that.

Rogerio Araujo -- UBS -- Analyst

Okay. Yes. Thank you. Very clear. So my second question is on connectivity. So how the lower number of flights impacts the connectivity -- the connection time for the passengers? Is there like a -- are you mapping out the connection time, the average connection time with passengers now versus before? And also there was an increase in the maximum number of hours that a passenger can wait in Panama from six to 12 hours. How does this change the demand? So -- was this a huge restriction before when it was settled at six hours? So if you could speak about that connectivity with lot of the capacity would be great as well? Thank you.

Pedro Heilbron -- Chief Executive Officer and Director

Yeah, well, the minimum hours connect -- that was lifted. So that restriction is not there any longer. So we're back to whatever we had before. And we flown so little up to now. That the priority has been just providing connections where we're flying not worrying about how long that connectivity is. And there is so much lack of service in most of our markets that passengers will wait as long as it's needed, as is needed to make their flights. So that's not a -- short connections are not a priority right now until we build back to something like what we had before.

Rogerio Araujo -- UBS -- Analyst

Very clear. Thanks so much.

Pedro Heilbron -- Chief Executive Officer and Director

Thank you, Rogerio.

Operator

Thank you. Our next question comes from the line of Bert Subin with Stifel. Your line is now open.

Bert Subin -- Stifel -- Analyst

Yeah, good morning. You mentioned in your prepared remarks that you think you will come out ahead after the pandemic. What do you see as the single greatest opportunity that Copa had in a post-vaccine world?

Pedro Heilbron -- Chief Executive Officer and Director

So what we meant by coming ahead, I would summarize that in two aspects. First is what Jose mentioned a few minutes ago about lowering our fixed cost to a point where we could be as successful as before with much lower ASM, which means that as we increase ASMs to a level more similar to 2019, we will do better than 2019. So that's number one, what we mean by coming out of head, so a better cost structure. And number two is the value of the Copa Hub of the America advantage in a marketplace where a lot of markets will not be able to sustain -- for the markets won't be able to sustain direct point-to-point service. So our Hub will be even more valuable. So I'll say go for two things that we're looking at.

Bert Subin -- Stifel -- Analyst

Okay. Yeah. That's helpful. Thank you. I know this is a smaller part of your business. But have you seen any opportunity in the cargo market just as capacity has been significantly curtailed across both South and Central America? Or do you sort of expect that to just come back like it was last year?

Pedro Heilbron -- Chief Executive Officer and Director

We -- and most of our cargo is very big cargo. We don't operate freighter although we might do ad-hoc freighter charges here and there, but we do not operate freighter aircraft. So the opportunity in the cargo market right now are limited.

Bert Subin -- Stifel -- Analyst

Thanks for the time.

Jose Montero -- Chief Financial Officer

Thank you, Bert.

Operator

Thank you. Our next question comes from the line of Dan McKenzie with Seaport Global Securities. Your line is now open.

Dan McKenzie -- Seaport Global Securities. -- Analyst

Hey, thanks, good morning guys. Going back to the commentary of a challenging 2021 because of the region could be subject to further travel restrictions. Is the -- is that concern tied to the timing of the rollout in vaccines in key end-markets? I'm wondering what you can share here. And just related this, going back to kind of your thoughts on corporate traveler, I know accounts can't share what they're doing -- what they're going to do right now, and I know people want to get back in the year. But I'm just wondering what you can share about your starting assumptions as you think about planning for 2021, maybe your best estimate of what it could look like?

Pedro Heilbron -- Chief Executive Officer and Director

Yes. So I think -- Dan, I think it's correct to think that we're being very careful and conservative in our assumptions, because we already know and there are still risks out there. The vaccine news are very encouraging, but we are unsure of how long it's going to take for the vaccines to be widely available, especially in our region. So will that happen in mid 2021 or toward the end of 2021? It's really hard to tell. And in the meantime, anything can happen like we've seen in the US and in Europe. We've seen the second ways and the effects that it had upon air traffic in the US and Europe. So, we're being careful and we're being conservative as we usually are. I would say that that's kind of what you're seeing in the numbers we're sharing.

Jose Montero -- Chief Financial Officer

And keeping flexibility open, I think that again we are saying this flexibility Dan, it's critical for 2021.

Dan McKenzie -- Seaport Global Securities. -- Analyst

Understood. And I guess just related to VFR traffic, what can you share about the people that are willing to travel right now, so kind of their profile or demographic? Are these primarily millennials who just don't care about the virus? And I guess, kind of where I'm going with the question is, I'm just wondering do we get to a place where demand plateaus that say 50% until vaccines are rolled out? Or is the thought as you think about 2021, you know that the recovery and if this goes back to your response to a prior question, that it could just increase kind of at a steady clip or steady rate each month sequentially as we move forward?

Pedro Heilbron -- Chief Executive Officer and Director

In our 2021 thinking, I would not even call it a projection -- but in our 2021 thinking, we are assuming that there is a plateau before the vaccines are widely available that there will be a plateau. We just don't know at what level we are going to hit that plateau, but we are expecting and we're planning for that. We've seen it in other parts of the world. People want to travel. And actually I'm surprised on a positive way by what people tell me. But still, that's just the percentage. So where's that plateau that's a big question and that's why again we're being so careful.

Dan McKenzie -- Seaport Global Securities. -- Analyst

Okay. Understood. Thanks for the time guys.

Pedro Heilbron -- Chief Executive Officer and Director

Thank you.

Operator

Thank you. Our next question comes from the line of Mike Linenberg with Deutsche Bank. Your line is now open.

Mike Linenberg -- Deutsche Bank -- Analyst

Hey, good morning, everyone, Pedro, Jose. Hey two questions here. So you know as you indicated in the release, you hit 38 destinations in November. And I think Jose, I heard you say 50 by year end. Pre-COVID, I think you were at 80 destinations. And the reason on that sort of bringing this up is that you made this decision a year ago to get out of here 100-seaters and your 124-seaters. So if your small shell is about 160 seats or so plus or minus a few. When we look at -- when that decision was made, I suspect that you probably thought that maybe a few of the cities with lose service given the size of the gauge or maybe it will lose frequency maybe it won't make economic sense. With COVID now, the impact of that has had on demand, does that leg you as an organization to maybe reconsider operating a smaller aircraft maybe a 737-7MAX, for example? I realize that that goes against the grain of what you want to do from a unit cost perspective. But it would think that by getting out of these smaller shelves that you're going to preclude yourself from serving, more than just a few of the 80 cities that you served of pre-COVID. Thoughts on that?

Pedro Heilbron -- Chief Executive Officer and Director

Yeah. So, Mike, first thing, I'll say is that we're very happy with the way we have simplified the fleet, and how quickly, we've been able to do that. We're very happy. I mean, our flight operations team is even half year, the maintenance team is delighted. And our costs are going also be better with a simplified fleet and a larger gauge. So our unit costs are happy also.

Jose Montero -- Chief Financial Officer

The finance team is also very happy.

Pedro Heilbron -- Chief Executive Officer and Director

The finance team is also -- everybody is happy.

Mike Linenberg -- Deutsche Bank -- Analyst

Okay.

Pedro Heilbron -- Chief Executive Officer and Director

As you will see there will be some smaller markets that on paper could suffer. Our plan is one or our pre-pandemic plan or our current plan or whatever you want to call it -- that we can adjust frequency as needed in some smaller markets. But also usually our small markets, where we don't serve with that many frequencies are mostly leisure. And leisure can be stimulated with pricing and our larger gauge aircraft can allow us to offer better pricing, at much lower costs. So we think with those things adjusting frequencies and pricing for leisure, we can make the capacity work. And actually the financials should work better also.

Mike Linenberg -- Deutsche Bank -- Analyst

All right. That makes sense. And just my second question on the power by the hour agreements [Indecipherable] that you entered into, you've been very good or you've been a bit of a standout when it comes to meeting your liabilities, making your payments not deferring aircraft rent. Up until this point, any call that at least I've been on these power by the hour deals [Indecipherable] were ones that were initiated by the lessees who were coming from a point where -- call it their negotiation leverage was somewhat weak, and they needed some assistance. I get the sense from the conversations are what went on here is that this was from a point of strength where the lessors came to you and realize that they didn't want to have all these 737-800s coming back. And so as a company, you were able to extract something very attractive to you from an aircraft ownership perspective. Is that the right interpretation here?

Jose Montero -- Chief Financial Officer

Well, Mike, I would say that it was mutual discussion and we've been having discussions with our lessors for the last several months. And the one thing is that, yeah, I think it was a win-win in the sense that, yeah, they don't get an airplane dropped in a very difficult moment for them. And at the same time, we win by the fact that we get immediate benefits from this negotiation that we made. So I say that it's -- it was a win-win for fall and off.

Pedro Heilbron -- Chief Executive Officer and Director

And Mike, Pedro here. Our lessors probably bullish and feel that much better and having those plans with no clients, which are in Copa, continue taking good care of the plane and probably bullish in the sense that maybe the recovery in their mind will come sooner and those hours are going to be thrown and paid for. So it's the win-win state mentioning.

Mike Linenberg -- Deutsche Bank -- Analyst

That's great. Can I just one -- quick squeeze in just one more on just the Boeing negotiation. And this is just from a modeling perspective as we think about your cash out over the next year or so. Some carriers have, in their discussions with Boeing, we've seen somewhere, the net result has been the future benefit as it relates to ownership cost, for others, we've seen them receive one or multiple payments, what they call vendor support or vendor payments in return. Is there anything that you can tell us at least from a cash modeling perspective what we should anticipate with respect to the agreement with Boeing?

Jose Montero -- Chief Financial Officer

Yeah, Mike. I'm not going to get into the details of the nature of the negotiations because of comprehension nature.

Mike Linenberg -- Deutsche Bank -- Analyst

Okay.

Jose Montero -- Chief Financial Officer

One thing is that it is not included in our cash flow projections that we've shared with the market. In our expectation for cash consumption, do not include any assumptions of anything related why? I mean, we've been very, very keen on making sure that we project our cash consumption in a very straight way. So we're not adding sort of these extraordinary items into it.

Mike Linenberg -- Deutsche Bank -- Analyst

Very helpful. Thanks, Jose. Thanks. Pedro.

Pedro Heilbron -- Chief Executive Officer and Director

Thank you, Mike.

Operator

Thank you. Our last question comes from the line of Stephen Trent with Citi. Your line is now open.

Stephen Trent -- Citi -- Analyst

Thank you very much guys. And I appreciate the time. I could add one or two quick follow-ups, if I may. When we think Copa's passenger flow overlap with the likes of Avianca or AeroMexico sort of -- what sort of overlap did you guys have on a pre-pandemic basis just thinking about your trunk that exposure?

Pedro Heilbron -- Chief Executive Officer and Director

I think with Avianca, we have the most overlap. The Bogota hub and the Panama hub, some of the most overlap versus others. But destinations sort of Panama were close to twice the number that are certain from Bogota. So we had that advantage. But those are the two hubs that overlap the most.

Stephen Trent -- Citi -- Analyst

Great. Appreciate that, Pedro. And just one really quick follow up. And I know it's early days and I know there are a whole bunch of moving parts here. But when do you think about longer-term opportunities, how are you thinking any differently with respect to potential M&A? Or with respect to down the line setting up that joint business agreement with United Airlines sort of, one, is it take your temperature on those opportunities, if I may?

Pedro Heilbron -- Chief Executive Officer and Director

Yeah, I mean the joint business agreement? It was never filed, but it's still a possibility, of course. It hasn't been ended either. So as we know Avianca in a Chapter-11 process, so that kind of throws everything overboard and -- we have to -- not necessarily start from scratch, but we take those conversations when they have their -- when they understand their future better when the Chapter 11 proceedings are more advanced. So we expect to continue those conversations at some point, but hard to tell what's going to happen right now.

Stephen Trent -- Citi -- Analyst

Understand. I will appreciate that Pedro, and hope you guys all stay safe and healthy.

Pedro Heilbron -- Chief Executive Officer and Director

Thank you, Stephen. Thank you.

Operator

Thank you. This concludes today's question-and-answer session. I would now turn the call back to Pedro Heilbron for closing remarks.

Pedro Heilbron -- Chief Executive Officer and Director

Okay. Thank you all. This concludes our earnings call. Thank you for being with us. Thank you for your continued support. Everyone talk again have a much better end of the year than what we have experienced in the last few months. And have of course a great day and a great weekend. So hope to see you soon. Thank you.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Raul Pascual -- Director of Investor Relations

Pedro Heilbron -- Chief Executive Officer and Director

Jose Montero -- Chief Financial Officer

Duane Pfennigwerth -- Evercore ISI -- Analyst

Alejandro Zamacona -- Credit Suisse -- Analyst

Matt Roberts -- Raymond James -- Analyst

Helane Becker -- Cowen -- Analyst

Hunter Keay -- Wolfe Research -- Analyst

Rogerio Araujo -- UBS -- Analyst

Bert Subin -- Stifel -- Analyst

Dan McKenzie -- Seaport Global Securities. -- Analyst

Mike Linenberg -- Deutsche Bank -- Analyst

Stephen Trent -- Citi -- Analyst

More CPA analysis

All earnings call transcripts

AlphaStreet Logo

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.