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Copa Holdings SA (NYSE:CPA)
Q4 2020 Earnings Call
Feb 11, 2021, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to Copa Holdings Fourth Quarter Earnings Call. [Operator Instructions] As a reminder, this call is being webcast and recorded on February, 11, 2020.

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

Raul Pascual -- Director of Investor Relations

Thank you, Celine, 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 the actions the company has taken to mitigate the impact from the COVID-19 pandemic, followed by Jose, who will discuss our fourth quarter and full-year 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 to IFRS financial measures can be found in our earnings release which has 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 fourth quarter and full-year earnings call. I hope that 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 their continuous efforts and many sacrifices during this difficult times. To them, as always, my utmost respect and admirations. It goes without saying that 2020 was the most challenging year the industry has ever faced. And while we all hope 2021 will be better, we know it's going to be a long and twisting road to recovery.

During the year, we undertook several actions to strengthen the company and mitigate the impact from the COVID-19 pandemic, including tapping into new liquidity sources, raising more than $650 million via a convertible bond issuance and several secured and unsecured committed credit facilities; recognizing the severity of this crisis early on and aggressively canceling or deferring all capital expenditures that were deemed non-essential and immediately began a series of cost reduction initiatives, including contract renegotiations with suppliers and a thorough evaluation of our entire cost structure; adjusting the company's size to better match future capacity over the next few years, while retaining the flexibility to accelerate or slow down our capacity redeployment plans if needed; simplifying our fleet by retiring 14 Embraer 190 and 14 737-700s, which will eventually lead to significant improvements in unit costs; implementing robust bio-safety protocols and a simplified onboard product offering to ensure the safety of our passengers and crew members; providing flexibility to our customers by waiving change penalties and offering credits for future travel, which led to most passengers keeping their ticket despite the prolonged stoppage of our operations.

And to this day, we continue implementing new initiatives to mitigate the impact from the pandemic, strengthen the company and facilitate a safe and efficient travel experience for our passengers. For instance, earlier this month, IATA announced a coordinated effort with the Government of Panama and Copa to trial the new IATA Travel Pass, a mobile app to help passengers securely manage their troubles in compliance with the COVID testing and/or vaccine requirements of their destinations. Panama is the first country who agreed to participate in the trial, and Copa the first airline to do so in the Americas. We believe initiatives like this one are essential to the recovery of international air travel.

Turning now to our fourth quarter results. As per the plan communicated in our last earnings call, after virtually no operations in more than five months, we successfully restarted the Hub in the fourth quarter, increasing capacity to 15% in October, 28% in November and 39% in December as compared to the same months in 2019, and ended the year having restarted service to 51 destinations. A combined -- a combination of pent-up demand and holiday season VFR travel resulted in a healthy 75% load factor for the quarter. We were encouraged by the demand patterns we saw and we're hopeful for this trend to continue into the first quarter of 2021.

As you've heard from other industry reports, this is not the case. COVID cases started spiking throughout the world during December. A new more aggressive COVID variant have led to additional international travel restrictions and a deteriorating demand environment. As a matter of fact, yesterday, we released our January 2021 traffic figures, reporting load factors of 63% compared to the 75% reported for December 2020. Jose will provide our current outlook for the first quarter, which includes a revised capacity plan, our latest revenue assumptions and an update in the cash consumption figures.

Finally, 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, leveraging Panama's advantageous geographic position with the region's lowest unit cost for a full service carrier, best 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 American 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'll 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 in acknowledging our great Copa team for all their efforts and great spirit during these very challenging times. I'll start by going over our full year results. Due to airtime restrictions related to the COVID-19 pandemic, and due to the continued shutdown of our operations [Technical Issues] for the full year came in more than 70% below 2019. We reported a net loss of $598.6 million for 2020 or $14.08 per share. Adjusting for special items, we would have reported a net loss of $259.5 million or $6.11 per share. Special items for the full year include a $191.2 million impairment charge on the 737-700 fleet and unrealized mark-to-market loss of $98.7 million related to the company's convertible notes and a $49.1 million loss on the sale of the Embraer 190 assets. On an operating basis, we reported a full year loss of $460.9 million, $220.6 million while adjusting for special items.

Turning now to the fourth quarter, our capacity came in at 1.7 billion available seat miles, amounts to about 27% of the capacity operated during the fourth quarter of 2019. We reported a net loss of $168.8 million or $3.97 per share. Excluding special items, we reported a net loss of $85.2 million or $2 per share. Special items in the quarter are comprised mainly by unrealized mark-to-market loss of $80.1 million related to the company's convertible notes and a $4.4 million impairment charge on the 737-700 fleet.

In terms of operating results, we reported a $95.1 million loss for the quarter and a $91.5 million when excluding special items. Our cash consumption for the fourth quarter came in better than expected at an average of $6 million per month, in part, benefiting from the positive effect of the rental sales as a result of reestablishing operations and the settlement of a lower level of payables compared to expenses given the small operational base in the third quarter.

Our expenses for the fourth quarter reflects some of the savings initiatives implemented throughout 2020. However, variable expenses from the quarter will show up as part of our Q1 2021 cash outflows, given the ramp up in capacity during the latter part of the fourth quarter.

I'm going to spend some time now, discussing our balance sheet and liquidity. As of the end of the fourth quarter, our cash, short-term, and long-term investments ended at $1 billion. We also ended the year with an aggregate amount of $305 million in unutilized committed credit facilities, which added to our cash equating to more than $1.3 billion in total available liquidity. We expect to continue working on strengthening our liquidity during 2021.

In fact, since the beginning of the year, we have added new credit commitments in the amount of $40 million bringing our total undrawn committed credit facility to $345 million. As to our debt, we ended the year with $1.4 billion of debt and lease liabilities.

Turning now to our fleet. According to the fleet plan that we laid out in the last earnings call, during the fourth quarter, we finalized delivery of five Embraer 190. And as of today, have delivered seven out of the 14 that we've agreed to sell to a third-party. We expect to have delivered the entire E-190 fleet by June 2021.

We are pleased to report, we restarted the operations for MAX fleet in December. We also took delivery of one new MAX 9 during the month. The 737 MAX 9 offers a very unique service and performance [Technical Issues]. We ended the year with 75 aircraft; 68 737-800s and seven MAX 9s. Included in these figures are 17 737-800s that will remain in temporary storage until the net trends call for additional new capacity.

During the fourth quarter, we also renegotiated a subset of our aircraft leases expiring in 2021 [Technical Issues]. As of now, during 2021, we expect to return one leased 737-800. So far in 2021, we have received three more MAX 9s and expect to receive three more by the end of the first quarter. We are pleased to inform that we have received a final commitment from the Export-Import Bank of the United States for a guaranteed loan of $327.9 million to finance these seven MAX 9s [Phonetic]. It is important to highlight that these seven MAX 9s are already manufactured and we're taking delivery of them as part of the revised [Technical Issues]. And also report that during the first quarter, we signed a compensation agreement with Boeing related to the MAX grounding.

Turning now to our expectations for 2021. As Pedro mentioned, we are still in very uncertain and [Technical Issues] and operating environment. As such, we will not be providing full year guidance. However, based on preliminary January results and the industrywide slowdown in international demand that we are experiencing, we can provide the following outlook for the first quarter of 2021 compared to the first quarter of 2019. We expect capacity to be 40% of Q1 2019 levels at about 2.6 billion ASMs. And revenues to be in the range of 25% to 30% of Q1 2019 levels at about $170 million to $200 million. Given these operating conditions, we expect our cash consumption for the first quarter to be in the range of $40 million to $45 million per month. This cash consumption is a result mainly of lower sales expectations for the quarter, cost impact of expanding operations and the working capital changes I mentioned earlier related to the ramp up of capacity that we executed during the fourth quarter of 2020. Given the recent demand trends, we will definitely perform some adjustments in capacity for the second quarter and possibly the remainder of the year.

Despite the projected increase of cash consumption, we expect to improve the company's liquidity position during the first quarter as a result of the new flight facilities I mentioned, as well as cash inflows including pre-delivery payment reimbursements and funds from financing related to aircraft deliveries, proceeds from aircraft sales and other items.

Let me close by saying that once this most challenging situation passes, we believe Copa's Hub of the Americas will remain the best connecting point for travelers in the region with a privilege location and even more efficient business model with lower costs and the best innovators.

Thank you. And with that, we'll open the call to some questions.

Questions and Answers:

Operator

[Operator Instructions] We have our first question coming from the line of Hunter Keay with Wolfe Research. Your line is open.

Hunter Keay -- Wolfe Research -- Analyst

Hey, good morning, everybody.

Pedro Heilbron -- Chief Executive Officer and Director

Good morning.

Hunter Keay -- Wolfe Research -- Analyst

Pedro, can you give us an update on the current state of travel restrictions in Panama? What changed recently? And what's your expectation for the outlook going forward?

Pedro Heilbron -- Chief Executive Officer and Director

Okay. Thank you, Hunter. Panama has not changed for more than a few months now. Panama is requiring either a negative PCR or antigen test within 48 hours of travel or travelers can have the test done or they can take the test at the airport upon arrival. So traveling to Panama is not really a problem right now.

Jose Montero -- Chief Financial Officer

And to complement that, if you're connecting through Panama there's [Technical Issues].

Hunter Keay -- Wolfe Research -- Analyst

Okay, good. Thanks for that. I'm having a little trouble hearing you, Jose. I missed a lot of your prepared remarks. So if you could -- you sound kind of distant. Can you just tell us if you said anything, I'm sorry if I missed it, on your delivery schedule, what you're expecting from Boeing this year and possibly what you currently have planned for next year, given the settlement was reached?

Jose Montero -- Chief Financial Officer

Yes, sorry, Hunter, we're trying to do some social distancing here with the microphone, so that's the reason. For this year, we, in our current fleet plan have a delivery of eight airplanes, eight MAXs throughout 2021 and when you add to that the airplane that we received in December, that's a total of nine MAXs to be delivered between December 2020 and full year 2021.

Hunter Keay -- Wolfe Research -- Analyst

Okay.

Jose Montero -- Chief Financial Officer

So-and for '22, we also published a revised fleet plan that has five MAXs arriving in 2022.

Hunter Keay -- Wolfe Research -- Analyst

Okay, thanks, everybody.

Operator

We have our next question coming from the line of Helane Becker with Cowen. Your line is open.

Helane Becker -- Cowen -- Analyst

Thanks very much, operator. Hi, gentlemen. Thanks for the time. I just have two questions. One is on the MAX. Have you heard any comments from your customers about acceptance of that aircraft? Has there been any pushback or have you heard anything about that?

Pedro Heilbron -- Chief Executive Officer and Director

Hi, Helane. No negative comments, no passengers refusing to fly the airplane. It's been like just any other aircraft in our fleet. No issues whatsoever. Even in the few occasions where we've had technical delays, no issues different than a normal flight with a normal 800 engine, which is of course good news.

Helane Becker -- Cowen -- Analyst

Okay, that's very helpful. Thank you. And then in terms of financing those aircraft, Jose, on the eight that are coming this year and the five next year, have they already been pre-financed? Because like Hunter, I couldn't hear you well. Is that what you were talking about on the Ex-Im financing?

Jose Montero -- Chief Financial Officer

Yeah, sorry, Helane, and again I apologize to all those on the call. The -- I was working off a separate mic and so hopefully the Q&A session is going to be a little bit clearer. The Ex-Im financing that we have received is for the first seven airplanes. We -- so all airplanes that are going to be delivered during the Q1 of 2021 have already been settled. There are airplanes coming in in the latter part of the year. The remaining aircraft that are coming this year are going to be in the latter part of 2021. And those -- there's preliminary commitment as well for those, but those are probably going to be concluded or finalized during the middle part of this year.

Helane Becker -- Cowen -- Analyst

Okay, thank you. Thanks very much.

Pedro Heilbron -- Chief Executive Officer and Director

Thanks, Helane.

Operator

We have our next question coming from the line of Diego Gaxiola with Credit Suisse. Your line is open.

Diego Gaxiola -- Credit Suisse -- Analyst

Hi, good morning. Thank you for taking my questions. So my first one is on the 4Q20 cash burn rate? Why was it so low compared to 3Q20? And then again, why do you expect the first quarter of 2021 to be even higher than the third quarter of 2020?

Jose Montero -- Chief Financial Officer

Yes, Diego. This is Jose here. There's a couple of points there. Number one, in the fourth quarter, there was a very important ramp-up in sales. So the biggest driver of the performance that we saw in the cash burn for the fourth quarter was the ramp-up in sales, actually moving ahead of the variable cash outflows that we had during the quarter. So that's the biggest driver of the improvement in the fourth quarter is specifically sales. There is a portion of the expenses that were accrued during the fourth quarter that, from a cash point, are being settled in the first quarter. So that's also a portion of the $40 million to $45 million estimate that we put for the first quarter is carrying a portion of those cash outflows that's very unique to the fourth quarter because of that fast ramp-up in capacity that we had. That's about, I would say, of the $40 million to $45 million, about $10 million are related to Q4 activities. And so therefore when you kind of equate everything Q4 or Q1 of 2021, corrected for sort of working capital difference, it ends up being in the mid-30s, $30 million to $35 million range. But again, we're providing the guidance with a sort of burn movement that we'll see during the first quarter.

And then the other component of Q1 is that there has been -- which is more significantly, there has been a slowdown in the sales of -- that we've seen starting in the middle part of December and into the month of January of this year. So we're seeing that as well. And that's also what explains the difference in the cash consumption estimate that we're providing for Q1 versus Q4 of 2020.

Diego Gaxiola -- Credit Suisse -- Analyst

Okay, thank you. That's very helpful. And, if I may, just a quick follow up. Talking about the maintenance expense, how do we think about it in the coming quarters? Did the -- 4Q20 was impacted by some sort of one-time with the aircraft coming out of long-term storage or it is a more stabilized level or how can we think about it?

Jose Montero -- Chief Financial Officer

Yeah, there was some one-time expenses in the fourth quarter related to taking the airplanes out of storage, but -- so there is a portion of it that shows up in our expense line, but it wasn't significant in general terms. There is also in our maintenance line, in the fourth quarter, some accruals that we did related to airplane lease returns. That was a bigger driver, but again, also was more of a one-time type of effect as well.

Diego Gaxiola -- Credit Suisse -- Analyst

Okay, thank you very much.

Operator

We have our next question coming from the line of Savi Syth with Raymond James. Your line is open.

Savi Syth -- Raymond James -- Analyst

Hello, everyone. I was curious what your 2021 and 2022 growth and net capex plans were based on what your delivery plans are. And then also beyond 2022, do you have flexibility in the deliveries or is that fixed now?

Jose Montero -- Chief Financial Officer

Yes, Savi, I can -- or you want to start?

Pedro Heilbron -- Chief Executive Officer and Director

Yeah, I'll start with growth and then you can talk capex. So we spoke of, I mean, we are guiding to 40% capacity in the first quarter as compared to 2019. For the rest of the year, it's really hard to tell. I mean, we could use that as a base and depending on how demand behaves, we're going to adjust upwards or downwards. And actually for February and March, we are going to be adjusting downwards due to the slowness in sales that Jose alluded to. And the rest of the year, second half of the year, it's hard to tell right now. If the vaccine -- the vaccination efforts are successful throughout our continent then maybe growth will be faster and we have the flexibility, we have planes in storage, which we can bring back to the operating line fairly quickly. And in the next few years, we have a combination of new deliveries plus lease expirations that we can play with. So we feel we have all the flexibility we need in 2021 and 2022 and we'll adjust according to demand, which again is changing and hard to predict, at least, in the short -- in the medium to long term.

Jose Montero -- Chief Financial Officer

Savi, so in terms of capex, the total figure that we're looking at for 2021 is around $460 million and of that, I'd say, cash, which is related mostly to airplane maintenance is around $60 million. And in '22, you can assume that it's around $300 million, of which, call it, again, same $60 million related to airplane maintenance and that will be a cash capex.

Savi Syth -- Raymond James -- Analyst

That's helpful. And just if I may follow-up on a previous question. I was just wondering if there were -- as you saw the demand recover prior to kind of the COVID rate increasing, just, were there any kind of regions where you saw kind of strength -- kind of more strength or greater weakness and just as a guide to how we -- what we might see as we get vaccine levels higher? Any insights into just kind of regionally what we might be in for?

Pedro Heilbron -- Chief Executive Officer and Director

Not really. I mean, the larger markets can sustain higher capacity. There's always going to be more demand and what we've seen so far is a shift to more VFR travel and also I should mention that there was a lot of pent-up demand in November and December and most of that was VFR travel. People needed to get back home, go visit their relatives, etc. And there is leisure demand. I mean, there is leisure demand going from the big markets in the South to the tourist destinations in the Caribbean or North America. There is some of that. I mean, we don't participate in the U.S. to Mexico market, for example, but we know that market, it's more active than others. So -- but it's mostly VFR, however.

Savi Syth -- Raymond James -- Analyst

That's helpful, thank you.

Jose Montero -- Chief Financial Officer

Thank you, Savi.

Operator

We have our next question coming from the line of Rogerio Araujo with UBS. Your line is open.

Rogerio Araujo -- UBS -- Analyst

Thank you. Hi, Jose. Hi, Pedro. Thanks a lot for the call. So a few quick questions here on my side. First on the restrictions posted by the U.S. They are -- test is mandatory now but also they mentioned about quarantine. Is this in place or will there be soon a quarantine of seven days mandatory there? So do you expect this to impact the -- your demand and by how much, if that's the case? That's my first one. Thank you.

Pedro Heilbron -- Chief Executive Officer and Director

Okay. So the only restriction right now, flight to the U.S. is the required PCR test, negative test. The quarantine restriction, I understand, is just a possibility that has not been decided on so far. So that's -- it's not in effect right now and there's no certainty that it will be at any point in time. The PCR test, we don't see it as having an effect on travel. The tests, I think, are widely available right now for passengers. So in any of our markets, I mean, that's -- those tests are required in most of our markets right now. And we won't see that as the impediment for travels and same with the U.S. In terms of what effect the quarantine would have, hard to tell. And that would have an effect for sure, but it's hard for us to get how significant it will be.

Rogerio Araujo -- UBS -- Analyst

Okay. Very clear. Thank you. A couple of quick ones as well. Well first on -- so you said how many MAX you're going to receive. So also including the aircraft returns, what is going to be your capacity -- your seat capacity expected for end of this year versus pre-COVID levels? And also the other one is regarding January RPM. It actually significantly came below what our capacity was. So is Copa focusing on yields that's why we see load factor dropping? Or was there a huge frustration on the demand even with some stimulation coming from different ticket fares? Thank you.

Pedro Heilbron -- Chief Executive Officer and Director

Right. Okay, Rogerio. So capacity is going to depend on demand as we mentioned before. So for -- January was 40% in that range, and it's kind of what we're guiding to for the first quarter. But the way demand is looking right now, we're going to probably adjust it downwards. And for the rest of the year, it's going to depend on that on demand, which is very hard to predict other than a few months out. And even then, it's not that easy.

We have the fleet, as mentioned before. In -- on paper, we could grow as high as 80% in terms of ASM versus 2019 in this year. But we know that's not realistic. That's not going to happen. And next year, we could go even higher. But again, that's not realistic. So it's going to be in that 40%, maybe 50% range -- percent rage, but it depends again on demand, the flexibility we have. And in terms of what happened in January, no, it's not that we're going for yields, it -- I mean, summarizing it very quickly, and our sales peaked in November. Our revenues peaked in December and our capacity in terms of ASMs peaked in January. So -- but in November, we didn't know that January, that sales were going to slow down in December and that January, we're going to be a little bit long on capacity. And I -- because it takes at least a few months to deploy capacity.

And even to cut back, we don't -- we cannot do it overnight. So we are adjusting now. It's a new reality role living, and we learn every day, and we always have to be on our toes adjusting capacity up or down depending on how we see demand. And also a -- short-term bookings are more significant, relevant now than before, because they don't come in as expected, then we have to then think about capacity.

Rogerio Araujo -- UBS -- Analyst

Thank you so much.

Operator

We have our next question coming from the line of Pablo Monsivais with Barclays. Your line is open.

Pablo Monsivais -- Barclays -- Analyst

Hi, good morning. Hi, everybody. Thanks for taking my question. I have a quick one. We know that perhaps capacity will be close to pre-COVID levels by 2021. But how do you think that unit revenues might perform this year? I mean, having in mind that business passengers should remain on the weaker side and international restrictions could remain in place, at least, in the next couple of months. How are you playing that capacity increase and unit revenue increase? We would -- it will be great to have more color on that. Thank you.

Jose Montero -- Chief Financial Officer

Well, the reality is that we are, as Pedro mentioned in the last answer, is that we are really focusing right now. The main path that we're harnessing, making sure that our capacity is flexible enough and attuned to the revenues that we're seeing in the market. And again, what we're seeing right now is that the entire market in the region has -- had a slowdown for the first part of the first quarter. And so we're making the adjustments in capacity in a light way. So it's made us have to be much more, I want to say, active in our deployment of capacity in the shorter term.

And that's something that we're implementing now. And so the revenue gap that we're seeing for the first quarter is still pretty significant. It is -- we're talking about revenues in the mid-20s to 30% of 2019 levels, which is a very significant reduction versus where we were at the beginning. So we're still seeing, again, a quite a bit of a gap versus normality. But again, the important thing is the adjustment of capacity to that, and that's what we're doing.

Pablo Monsivais -- Barclays -- Analyst

Of course. And I have another quick one on the cost side. Do you have any other measures that you are considering right now to adjust to this new demand environment that we have to think about? Or probably you already undertook everything on the cost side that you were able to do. And right now, it's just that additional cost of flying. How should we also follow the cost line for 2021, assuming that demand remains weak?

Jose Montero -- Chief Financial Officer

So look, Pablo, we came into the crisis with the lowest cost of our peers in the region. And during last year, we took quite a bit of measures, renegotiating contracts with most suppliers, reducing our IT expenditures, maintenance, labor, etc, right? So that's -- that -- we did quite a bit of that and that will continue on during 2021 as well. As I mentioned in the first part of the question, our main effort right now is in capacity deployment management. Those are -- the next step is making sure that our -- that we don't fly more ASMs that are needed in the market.

And in terms of additional cost measures, well, right now, we are in a position of strength. And we don't need to take drastic actions that could prove costly in the long run. So we have sort of the luxury is coming in with a strong balance sheet and with a low cost position, unless we see that the recovery is taking longer than what we expected. So then we have another set of items that we could do that are more aggressive in nature. But we have to be mindful also that we are going to be here for a long time and that we want to be ready for the recovery as well. So it's a balance, and that's what we've been doing.

Pablo Monsivais -- Barclays -- Analyst

Perfect. Thank you.

Operator

We have our next question coming from the line of Mike Linenberg with Deutsche Bank. Your line is open.

Mike Linenberg -- Deutsche Bank -- Analyst

Hey, good morning, everyone. I guess a question probably to Jose and maybe even Pedro. It seems like kind of another error when we're guiding to CASM ex of sub $0.06 in 2021. And I realize there's a lot of uncertainty as we look out through 2021. But I'm sure that your -- you also have a focus on the longer-term picture here.

I'm just curious given the events and the shifting in the fleet and the issues with the MAX, is a sub $0.06 CASM ex, is that even achievable by, say, 2023? Is that being aggressive? And I guess implicit in that question is that, are we back to full capacity by 2023, if not sooner? So I realize it's a longer-term range question. But the hope here is that you're still focused on achieving that sub $0.06 once we get through the pandemic.

Jose Montero -- Chief Financial Officer

Yes. Mike, that's a very, very good and important question. And I think that you point out correctly in the sense that more than necessarily a time frame or a particular month or year. The thing we have to think about it in terms of at what point in terms of our capacity recovery are we at those CASM levels. And of course, we think about that quite a bit. Our returning to sub-$0.06 CASM target. I answered the question in a couple of ways. One, I think that we should be able to achieve our sort of pre-pandemic CASM figures by the time that we are in about 80% of pre-COVID capacity. So I think that's -- which shows how much we've become more efficient throughout this process.

And then we are -- I think the data point, I think, is important is that I think when you do the numbers, if you're assuming a -- there are several moving pieces here, right? So if you assume that revenue dilution is in the mid-teens, we could be break -- cash breakeven by the moment that we are at about in the 70s of pre-COVID capacity. So that's another, I think, good data point to sort of understand how we're seeing the business in the medium-term and how our path to recovery is. But absolutely, we are focused on getting back into that track of getting to that sort of $0.06 of fixed CASM in the medium term.

Mike Linenberg -- Deutsche Bank -- Analyst

That's great.

Pedro Heilbron -- Chief Executive Officer and Director

And I would add, I think you mentioned when you asked when we could get back to those ASM levels. I don't think anybody knows. So we're not going to try to get that. But adding to what Jose just said, if we were at 100% tomorrow, we would be sub-$0.06 tomorrow.

Mike Linenberg -- Deutsche Bank -- Analyst

Interesting. That's helpful. Thanks. And just one quick one here, Pedro, and this is sort of a follow-up to Hunter's question on restrictions. I know you've addressed Panama's restrictions. I'm curious how your loads fared after the US stepped up its restrictions, the mandatory negative COVID test within 72 hours of arrival, that was January 26th. I'm curious how that hit your loads?

And I know during the quarter, I believe, did Argentina announced that carriers had to cut back their service by 30% to 60%? So if there's any chance you can just run through a couple of the examples because it does seem like that there was an increase in restrictions in other countries, not necessarily Panama, but countries that you serve. And like in Argentina, I think, even today, you still run on some days two flights a day, and most other carriers don't even serve [Technical Issues] I'm curious about some of the additional restrictions? And maybe even how you've seen loads or demand change within hours of those restrictions being announced? Thank you.

Pedro Heilbron -- Chief Executive Officer and Director

Okay. Thank you, and no, thank you, Mike. Because after Hunter's question, since you only mentioned Panama, I only answered Panama, and I kind of cross fingers that I could just stay there. So there -- so you're right. The restrictions are all over the place. The testing requirement for the US has not really had an effect, at least, not noticeable because from what I said before, it's widely -- the tests are now widely available. So it's not an impediment for people to travel. And most countries are requiring those tests anyway. So that's not really the problem. But I'll give you a few examples of what has happened in the last, let's say, 1.5 months, which has had an -- a direct impact on our sales on our business. And I'll just give you a few examples.

And you're right, Argentina is restricting flights. We were not restricted only because we already had a diminish -- a reduced schedule. We already had a very reduced schedule in Argentina. Only a few flights a week, so we could stay with that. But for example, our Venezuela flight was canceled for nearly a month due to the COVID. Havana took us from like two dailies to three flights a week, which I think has been now reduced to two flights a week only, for like more than a month.

Uruguay only allowed residents, nationals, who had booked before the restriction, so no new sales were allowed for like over a month in Uruguay. Some countries -- some other countries imposed new quarantine restrictions. And it's a long list. But when you add it up, it had a meaningful impact, and it's kind of part of what we're seeing right now because many of those restrictions remain in place as we speak.

Operator

We have our next question coming from the line of Duane Pfennigwerth with Evercore ISI. Your line is open.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Hey, thank you. Sorry if you covered this, but what were the main drivers of your cash burn improvement relative to the guidance? It was far better than what you guided to. Was it at all Boeing settlement related or aircraft sale related? And if not, can you comment on if those contributed?

Jose Montero -- Chief Financial Officer

Duane, how are you doing? This is Jose. The first thing now to make sure that we define the way that we look at cash burn, we look at cash burn from -- excluding all -- any sort of extraordinary items that -- such as the ones that you mentioned. So our -- the figure that we published is purely our operating cash flows and including sort of our debt commitments. Our outflows related to the service of our debt, and that's that. But aircraft sales and other sort of extraordinary items are not included in the figures. That's very important because we're very -- I want to say that we're very strict with the way that we look at this figure, and I think that's very good because it keeps us very, very much on top of the business.

Number two, that fourth quarter performance really saw an improvement because of the ramp-up in sales that we saw. We were operating at a very low level at the beginning of the quarter, and we ramped up capacity and sales were ahead of that. I think as Pedro mentioned before, sales were peaking in November. And so therefore, we had quite a bit of a ramp-up there. So that's what occurred. And the difference that we saw in terms of improvement was related mostly to the quick ramp-up in sales that we saw. And the fact that there's also a minor component there of some of the expenses that were accrued during the fourth quarter actually are going to be settled in cash during the first quarter. So there's like a $10 million switch there that should have come in, in the fourth quarter or corresponds to the fourth quarter.

So again, to summarize, and again, our cash burn figure, I think, in the appendix to our earnings release, there is a full reconciliation of our -- of the way that we calculate our cash burn. I only the very fair way and very correct way of doing it is right there. And number two, and you're right that it's very important than first quarter. However, even with the cash burn that we're reporting or forecasting or guiding to, $40 million to $45 million, it does not include some of those extraordinary measures that occur in terms of financing or cash related with financing activities, etc. So there, we will see an increase in our liquidity at the end of the first quarter. That is not counted in the cash burn figure that we are guiding to.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Sorry, and what would drive that increase in liquidity that you're not -- that's not included in the cash burn guidance?

Jose Montero -- Chief Financial Officer

Well, there are several items there. For example, the financing of aircraft that we have with -- including the reception of aircraft. There's some deposits that we have at Boeing that upon delivery, those deposits will still get financed with the excellent financing that we have established. There's aircraft sales that we're performing during the quarter, etc. So that increased the liquidity. And so of course, we also increased some of the available credit facilities that we have. So all that builds up on the liquidity, but it's not counted in -- within the cash consumption figure that we published.

Duane Pfennigwerth -- Evercore ISI -- Analyst

That's great detail. And then maybe just a macro question. As we contemplate massive fiscal stimulus here in the US, how are you thinking about the dollar versus local currencies in Latin America over the balance of 2021? I know historically, you'd sort of be unwilling to speak to currencies or make a bet in that regard. But how are you thinking about just the relative pacing of fiscal stimulus and the potential for local currency appreciation as recovery takes hold? Thanks for taking the questions.

Jose Montero -- Chief Financial Officer

Well, it's still very -- it's a very volatile situation in the region with the currencies. The currencies during the fourth quarter appreciated in general terms. Most of them -- most of the big major currencies in Latin America appreciated, which is actually helpful for us. But it is still -- it is very hard to, sort of, predict where they will ultimately end up. So again, strengthening currencies in the region should improve demand, but still, I think, secondary to the overall governmental restrictions and demand patterns that are out there. And in any case, I think, at this stage, it's somewhat hard to predict where the currencies might end up.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Appreciate the thought. It's worth a try. Thank you very much.

Jose Montero -- Chief Financial Officer

Thanks a lot.

Operator

We have our next question coming from the line of Dan McKenzie with Seaport Global. Your line is open.

Dan McKenzie -- Seaport Global -- Analyst

Hey, thanks. Good morning, guys. Following up on a prior question. I am wondering, what level of openness Panama or other countries have to say this idea of a COVID travel passport as a way to open up the region? And so I guess what willingness is there by governments to consider it? Are they consider it -- considering it, pardon me? And if they are, is the technology there at airports to adopt it?

Pedro Heilbron -- Chief Executive Officer and Director

Yes. It's interesting that there are -- that I know of at least 4 initiatives that I think are quite advanced in terms of coming out with a travel pass or a health pass, which, in our opinion, is going to be very important to reopen and to grow international travel for sure. So Panama and we recently announced together with IATA and the authorities in Panama that Panama and Copa will be part of the trial test of the new IATA Travel Pass. So this -- that's going to happen, I think, in the month of March, next month. Those trials are going to start. So Panama is very much committed to being part of the IATA Travel Pass. And I think that would also include the other travel passes that others -- or health passes that others are working on. So this is kind of an all-inclusive thing. And hopefully, they will communicate with it -- with each other. So we're very much involved at this point with IATA. We've talked to some of the others also and Panama is also on board.

Dan McKenzie -- Seaport Global -- Analyst

Which are the other three countries, Pedro?

Pedro Heilbron -- Chief Executive Officer and Director

Well, no, no. I'm sorry, not country, but initiatives. There's a common pass. IBM is working on something also, and Accenture, and plus IATA. So those are the -- at least the four, there might be others. But those are the four entities that are -- that I know of that are working on health passes or travel passes with pretty much the same objective.

Dan McKenzie -- Seaport Global -- Analyst

I see. Are any of the countries willing to talk about that at this point in addition to Panama?

Pedro Heilbron -- Chief Executive Officer and Director

Well, I've heard of other airlines around the world. In Asia and the Middle East, for sure, that are working with their government. I think the Emirates, Singapore and probably a few more are working with IATA and their national carriers to also pilot the IATA Travel Pass. And I believe same thing is happening with the common pass and some of the other initiatives that I mentioned.

Dan McKenzie -- Seaport Global -- Analyst

I see. Okay. I guess I was kind of wondering about Latin America. But if I could -- a second question here. The lie flat seats on the MAX. And it seems like there's a lot of pent-up revenue potential on those seats as demand normalizes. And it seems like it could normalize at some point here, maybe -- I don't know if it's later this year or next year or how you're thinking about the pace of the demand recovery. But I'm just -- as we kind of think about your ability to monetize that revenue, is it just as simple as the longer haul international markets opening up? Or are there other steps that you could take to help drive revenue from that part of the aircraft?

Pedro Heilbron -- Chief Executive Officer and Director

I would say that it's mostly business travel coming back. The aircraft will be deployed in our longer markets. That's already happening. And as we get more mechanized with the flat seats, we'll do more of that. So they're going to be mostly serving those markets. So it's about business travel coming back. But something interesting is that, our aircraft has grown. The MAX 9 is a narrow body. We have 16 flat seats on board. We serve markets that will not recover to the pre-COVID capacity in probably quite a while.And I'm not talking just Copa, but airlines flying nonstop, widebodies, the whole thing. So it's not that we need the business markets to come all the way back to what it used to be. We can -- we will serve markets that are going to be underserved. It's our feeling for a while. So we should be able to do well even before the business travel comes all the way back.

Dan McKenzie -- Seaport Global -- Analyst

That's perfect. Thanks for the time, guys.

Pedro Heilbron -- Chief Executive Officer and Director

Thanks.

Operator

We have our next question coming from the line of Stephen Trent with Citi. Your line is open.

Stephen Trent -- Citi -- Analyst

Hi, good morning, everybody. And thanks for taking my question. First off, I was just curious on the IATA Travel Pass. I'm very intrigued. Is Copa actually going to have to fork up any investment in that? Or will this be something covered through Panama and the governmental levels?

Pedro Heilbron -- Chief Executive Officer and Director

No. We're not investing in the tool. Neither is Panama. It is something that IATA is doing on its own, and we just agreed to be part of a trial and we're one of the first countries and airlines that participating in it. But what kind of cost distribution there's going to be in the future, we don't really know. I'm sure that the different travel and health passes are being developed. We have to cover its cost one way or another. I'm not sure that has been determined right now. And we're not involved in that process.

Stephen Trent -- Citi -- Analyst

Okay. Pedro, I appreciate that. And just on a longer-term question, if I may. When Copa thinks about the sort of broader initiative to get carbon emissions in 2050 down to half of 2005 levels or what have you, how is Copa thinking broadly about that carbon capture program? Certainly, the MAX is going to help. Your US partners talked about some investment or collaboration with electric planes and what have you. I'd just love to get your thoughts higher level, how you're thinking about that longer term?

Pedro Heilbron -- Chief Executive Officer and Director

Yes. So we're, of course, following very closely the CORSIA initiative. And even though Panama doesn't fall under the threshold that forces an implementation in the near future. We're still very much involved in reporting our carbon emissions on a yearly basis and also very much involved in just thinking about what are the initiatives that we need to have in place to be ready for when this becomes more of a requirement in our countries and in the industry, in general.

As you know, I'm also part of the -- of IATA's Board of Governors and Chair Committee. And it's a current and frequent topic of conversation. But I cannot tell you that we have a specific plan right now, more than just the reporting and the frequent conversations and evaluations of options. But we do not have a term plan as we speak. Of course, with our modern fleet of MAXs and 737-800 NG and our own company fuel-saving initiatives and some other initiatives in the company, like solar power at our -- some of our airport facilities, and we do all of that. But it does not compensate, obviously not even close, the carbon emissions of our regular flying. So there's more to come there in the future.

Stephen Trent -- Citi -- Analyst

Well, really appreciate the color, Pedro. Thank you for that and hope you guys and your families are all OK.

Jose Montero -- Chief Financial Officer

Thank you.

Pedro Heilbron -- Chief Executive Officer and Director

Thank you, Stephen.

Operator

We have our next question coming from the line of Guilherme Mendes with JPMorgan. Your line is open.

Guilherme Mendes -- JPMorgan -- Analyst

Hey, guys. Good morning, good afternoon. And thanks for taking my question. Actually it's two questions. The first one is a follow-up on the track to recovery. So you guys mentioned that VFR has been recovering faster than the other segments. So just help me think on how should we be thinking yields about going forward? Meaning that probably corporate travels will take longer to recover. So how should this reflect on yields in the second half of 2021?

And the second question is regarding the agreement with Boeing. I know the terms are confidential, but if you could just give some colors in terms of if most of the agreement is on a cash component basis or it's more related to maybe the agreements of the future receivables of MAX. That will be very useful. Thank you, guys.

Jose Montero -- Chief Financial Officer

Yes. Thank you, Guilherme. I would say that the -- first of all, we're not issuing a full year guidance. So I'll cover this more anything what we have in the shorter term. In the shorter term, we're seeing still significant drops in our yields throughout the network and over the 20% range on a year-over-year basis, and that's something that we're seeing, at least, in the short term.

And I think that the important component of that is that there's still a lot of variability into the rest of the year, so it's too early to determine where that's going to end up in the remainder of the year. And it's, I would say, now I don't see any particular region being different or acting in a particular way. I think they're all in the same range. And that's in terms of yields. And in terms of the Boeing agreement, it is a confidential agreement, so I would leave it there.

Guilherme Mendes -- JPMorgan -- Analyst

That's perfect. Thank you, guys.

Operator

There are no further question at this time. I will now turn the call back over to Pedro Heilbron.

Pedro Heilbron -- Chief Executive Officer and Director

Okay. Thank you. I just want to conclude saying that we think we're in a very good position in our region and in general terms. We were very proactive in 2020, taking some difficult, but necessary actions to bring down our cost structure, to adjust our fleet. We feel our hub is the best position in the region for what will, for a while, be a reduced market.

And we also have the right fleet standardized with the 737-800 NGs and the MAX 9s. So we know times are still a little bit difficult. But there's a shining light at the end of the tunnel with the vaccinating -- vaccination efforts, which are going to gain speed in the coming months, months and weeks for sure. So anyway, thanks for your support, and we'll keep moving in the right direction.

This concludes our earnings call, and well, have a great day. We'll see you in the next one.

Operator

[Operator Closing Remarks]

Duration: 64 minutes

Call participants:

Raul Pascual -- Director of Investor Relations

Pedro Heilbron -- Chief Executive Officer and Director

Jose Montero -- Chief Financial Officer

Hunter Keay -- Wolfe Research -- Analyst

Helane Becker -- Cowen -- Analyst

Diego Gaxiola -- Credit Suisse -- Analyst

Savi Syth -- Raymond James -- Analyst

Rogerio Araujo -- UBS -- Analyst

Pablo Monsivais -- Barclays -- Analyst

Mike Linenberg -- Deutsche Bank -- Analyst

Duane Pfennigwerth -- Evercore ISI -- Analyst

Dan McKenzie -- Seaport Global -- Analyst

Stephen Trent -- Citi -- Analyst

Guilherme Mendes -- JPMorgan -- Analyst

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