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Copa Holdings SA (NYSE:CPA)

Q4 2008 Earnings Call

February 19, 2009 11:00 AM ET

Executives

Joseph Putaturo - Director, Investor Relations

Pedro Heilbron - Chief Executive Officer

Victor Vial - Chief Financial Officer

Analysts

Ray Neidl - Calyon Securities

Michael Linenberg - Banc of America

Nicolai Sebrell - Morgan Stanley

Duane Pfennigwerth - Raymond James

James Parker - Raymond James

Jamie Baker - JPMorgan

Operator

Ladies and gentlemen thank you for standing by. Welcome to today's Copa Holdings Fourth Quarter 2008 Earnings Conference Call. During today's presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions). Just as a reminder, today's call is being recorded and webcast on February 19, 2009.

Now I would like to turn the conference over to Mr. Joe Putaturo, Director of Investor Relations. Please go ahead, sir.

Joseph Putaturo

Thank you very much operator and welcome everyone to our fourth quarter earnings call. Joining us today are Pedro Heilbron, CEO of Copa Holdings and Victor Vial, our Chief Financial Officer. First, Pedro we will open up with an overview of our fourth quarter and full year highlight, followed by Victor who will discuss our financial results. Immediately after, we'll open up the call for questions from analysts. We kindly request if you could limit yourself to one question with a brief follow-up, so we can accommodate most questions.

In today's call, we'll discuss non-GAAP financial measures. A reconciliation of non-GAAP to GAAP financial measures can be found in our fourth quarter earnings release, which has been posted on the company's website copaair.com. In addition, our discussion will contain forward-looking statements not limited to historical facts that reflect the company's current beliefs, expectations and our intentions regarding future events and results. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially and are based on assumptions that are subject to change. Many of these risks and uncertainties are discussed in our Annual Report filed with the SEC.

Now, I would like to turn the call over to our CEO, Pedro Heilbron.

Pedro Heilbron

Thank you, Joe. Good morning to all and thank you for participating in our fourth quarter earnings call. I would first like to begin by congratulating our co-workers for their efforts in delivering a great fourth quarter and another year of outstanding results, despite a very difficult operating environment.

Looking back at '08, it was a year of many accomplishments and highlight. Growth for '08 in terms of capacity was nearly 12% with our core business Copa Airlines growing almost 17%. Our consolidated operating margin for 2008 came in at 17.4% despite a 38% increase in our average affected price of jet fuel for the year. So I am pleased to say that our company continues to consistently deliver above average growth and industry leading margins even in the context of record fuel prices for the year.

In 2008, Copa Airlines expanded and consolidated its network adding five new destinations. Copa currently has a most complete and convenient network for intra-Latin America travel, serving 45 destinations in 24 countries in the Americas. At the same time, Aero Republica continued growing internationally and configuring to our consolidated network by initiating flights to Caracas, Venezuela from Bogota and Medellin.. As well as adding new service from Pereira, Colombia in to our Hub of the Americas in Panama City.

During the course of the year, Copa Airlines received five aircraft, one Boeing 737-800 and four Embraer-190. To end the year with a fleet of 44 aircraft, with an average age of approximately four years. In addition, Aero Republica continue to modernizing and rightsizing its fleet receiving two new Embraer-190 to end the year with 13 aircrafts of which all the four are brand new E-190. As a result, Copa Holdings consolidated fleet at year end reached 55 aircrafts.

For 2008, both Copa Airlines and Aero Republica delivered outstanding on-time performance with Copa Airlines coming in at 87.5% and Aero Republica leading the Colombian market with one-time performance of 84.5%. During the year Copa Airlines also received important awards and recognition. In September, Copa was named by Skytrax for its six consecutive years as the best airline in Central America and the Caribbean as world's best cabin staff.

Now looking at the main highlights for our fourth quarter results; Copa Holdings reported net income of 52 million or diluted earnings per share of $1.20. However, net income excluding special items in the net 64 million or diluted earnings per share of $1.48. Our operating margin for this quarter came in as an industry leading 24.3%. This result was driven by strong revenue growth, which increased nearly 22% year-over-year on 15% capacity growth.

Also contributing to these results are our continuous efforts in maintaining a very competitive cost structure. Unit costs for this quarter excluding fuel and adjusting for special items came in at $0.072 representing more than a 5% decrease year-over-year. I am also pleased to highlight that our company ended the quarter with a very healthy balance sheet and a very strong liquidity position.

On the operational front, in the fourth quarter, Copa Holdings took delivery of two aircrafts, one 737-800 and one Embraer-190. Additionally, Copa Airlines launched three new destinations during the quarter, Aruba, Santa Cruz, Bolivia, and Valencia Venezuela. All three destinations were launched in the month of December. Also in December, Aero Republica started new service from Pereira, Colombia into Panama City.

Now turning to our current business environment. We continue to see healthy traffic growth across most of our network. Our January traffic increased more than 15% and our consolidated load factor came in at 78%. Although, January is a high season month, we consider this result encouraging at a time when there is significant traffic deterioration in other parts of the world. However, our region is not isolated from the rest of the world, and economic growth projections have been revised downwards and the outlook for the global economy has deteriorated.

Related December IMS figures call for regional GDP growth of 1.1%, down from the 2.5% projected in October '08. Panama, which represents approximately 50% of our O&D traffic, is still expected to post healthy GDP growth in '09, some where between 4 to 6%.

As we have mentioned before, there are several private and public sector mega-projects already underway, the biggest among them being the Panama Canal expansion, which will continue to stimulate the economy and mitigate the affect of the global crisis going-forward. Nevertheless, we have seen early signs of softening demand in some markets and even though our visibility we have in the fourth quarter is very limited at this point. We have taken a cautious of guiding to lower load factors and yields. On the other hand, we expect lower projected fuel prices to offset its impact.

In terms of our fleet plan, we do maintain flexibility with regard to expired leases and on exercised options to adjust our growth going-forward, if necessary. In fact, we've recently decided to return two 737-700 whose leases are expiring in October of this year. As a result, our consolidated fleet will now end '09 with 52 aircrafts, one less than in '08. Although this return do not significantly impact '09 growth, they do provide us with more flexibility to manage capacity in 2010.

On a consolidated basis, we still expect to grow approximately 13% of the year -- for the year. This growth will be driven by Copa Airlines and Aero Republica capacity will remain flat year-over-year. Additionally, more than 80% of 2009 growth is a result of the full year affect of capacity introduced in '08. With regards to Aero Republica, we're very encouraged with their financial results on a standalone basis and even more when we take into accounts, the revenues it contributes to Copa Holdings through combining both the airlines network.

For the fourth quarter, Aero Republica's operating earnings came in at 13.6 million which represent an operating margin of 19.7%. Furthermore, for full year '08 and despite record fuel prices and considerable maintenance costs associated with the MD-80 fleet Aero Republica recorded operating earnings of 15.8 million for an operating margin of 5.9% and a small net profit.

Aero Republica growth factor and financial results are being positively impacted by their transition towards smaller gauge and more efficient Embraer fleet and growth in the international operations. In the fourth quarter, Aero Republica capacity flowing Embraer aircraft reached 63% against 35% in Q4 '07. Additionally, for the fourth quarter Aero Republica International capacity as a percentage of total capacity reached 25% with international load factors reaching 67% higher than its domestic load factor. So as you can see by all counts we consider our fourth quarter and full year '08 result extremely positive.

Our business model continued delivering growth at industry leading margins, even in that extremely challenging operating environment. Although, there is still much uncertainty on how the manned (ph) environment will play out in '09, we're very confident on our ability to meet the challenges ahead and take advantage of any opportunity that may arise.

Among the advantages that should help us navigate successfully through the year, are a very strong liquidity position and limited financing requirements for '09. A very flexible fleet plan and which if needed allows us to scroll back capacity growth going forward. Continued strength of Panama's economy and the expected growth of Latin America's economy and more importantly, the continued preference of our network and services for intra-Latin American travel.

With this, thank you now I would turn it over to Victor, who will go over our fourth quarter and full year financial results.

Victor Vial

Thank you Pedro and good morning everyone. Thanks again for joining us. First and foremost let me begin by joining Pedro in congratulating the whole team for another outstanding year. At least we reported despite record high fuel prices, Copa Holdings delivered another year of strong financial result with '08 net income before special items reaching 172.4 million or 13% increase over '07 adjusted net income.

Including special items net income for '08 came in at a $152.2 million, which translates to earnings per share of 350. For the fourth quarter, Copa Holdings net income excluding special items increased 74% year-over-year to $64.1 million. Including special items, net income for the fourth quarter came in at 51.9 million, which represents an increase of 46% and translates to diluted earnings per share of $1.20, well above consensus estimates for quarter.

The fourth quarter was marked by strong underlying demand which resulted in both high deals and load factors, with yields increasing 6% year-over-year, our load factors increased 0.3 percentage points to 74.1% on a 15% year-over-year capacity increase. This led to another quarter of increased unit revenue with passenger revenue per available seat mile or PRASM rising 6.5% on a year-over-year basis.

In terms of revenues Copa Holdings fourth quarter operating revenues came in at 346 million or a 22% year-over-year increase. With both segments showing revenue growth Copa Airlines with a 26% increase and 6% for Aero Republica.

In terms passenger revenue fourth quarter consolidated passenger revenue increased 22% compared to Q4 '07 to $326 million. On the expense side Q4 '08 operating expenses increased 11% compared to Q4 '07 operating expenses before special items, while unit cost or cost per available seat mile CASM excluding Q4 '07 special items decreased 3% year-over-year to $0.11. Unit cost excluding fuel and special items decreased approximately 5% year-over-year to $0.072 mostly as a result of lower commissions and overhead expenses.

Now turning to Copa Holdings main operating expenses compared to the fourth quarter of '07. Fuel expense increase 17% driven by a 13% volume increase due to increased capacity and a 4.5% increase in the average price for government jet fuel including a realized hedge loss of 8.8 million. Salaries and benefits increased 17% mainly as a result of an overall increase in operating head count to support increase capacity

Passenger servicing increased 14% driven by an increase in passengers carried, commissions decreased 20% mostly as a results of lower average commission rate in both Copa Airlines and Aero Republica.

Reservation and sales increased 10% mainly due to more passengers carried by Copa Airlines. Maintenance, materials and repairs increased 33% mainly due to higher capacity and more repairs and materials.

Depreciation increased 15% due to additional aircraft repairs; aircraft rentals increased 4% flight operations, landing fees and other rentals combined increased 15% mainly as a result of increased capacity and other operating expenses decreased by $1.5 million.

Other operating income and expense totaled a net non-operating expense of 22.9. The main component of which are net interest expense of $7.5 million and a $12.2 million charge associated with mark-to-market of hedged contracts related to future quarters. Regarding operating earnings, the company produced a record $84 million of operating earnings with excluding special charges recorded in Q4 '07 represent an increase of 71% while operating margins came in at 24.3%, 7 percentage points above Q4 '07 adjusted figures.

In terms of fuel hedges as part of the strategic hedging program, the company have hedged 25% of its consolidated fourth quarter volume. And currently have hedged 25% of '09 and 5% of 2010 consolidated volume to a combination of jet fuel and crude oil swaps and collars.

Now moving on to the balance sheet; assets at the end of the year approached a $2 billion mark, while owners equity reached 631 million and debt plus capitalized leases totaled $1.2 billion.

The company's bank debt at the end of the quarter totaled 916 million, 41% of which is US EXIM Bank guaranteed debt. Half of our total debt balance has been fixed for up to 12 years and the average blended rate including fixed and variable rate debt for the fourth quarter came in at a very competitive 3.7%.

In terms of cash, the company closed the year with a very strong cash position with $408 million in cash, short-term and long-term investments which represents approximately 32% on last 12 months revenue. This figure includes approximately $47 million in restricted cash of which 40 million are collateral for out of money hedge contracts related to future quarters. Additionally, the company has committed lines of credit which total $31 million.

So in summary, Copa Holdings had another year of outstanding financial and operational results. Fourth quarter showed healthy top-line growth of strong capacity expansion. We continue to manage our costs very efficiently, our balance sheet and liquidity position our stronger than ever and we continued to be well positioned for both the challenges and opportunities '09 may bring.

In terms of our guidance for '09 while we remain positive in our prospects, given that there is still much uncertainly on how demand will be affected by lower economic growth projections we continue to maintain a cautious stand in our outlook for the year. As such we are maintaining our guidance of consolidated capacity for the year in the range of 10 billion ASMs or a plus or minus 13% growth. We're lowering our load factor guidance to plus or minus 74% compared to 76% in '08. In light of a significant drop in fuel prices and consequently lower fuel surcharges and fares, in addition to some early signs of softening demand in some markets we're adjusting our RASM guidance to $0.126 which represents a year-over-year decrease of 14%.

We are now assuming an average price of jet fuel per gallon net of current hedges for a year to 211 compared to 324 for full year '08. We're maintaining our CASM ex-fuel guidance at plus or minus $0.075 which is flat compared to '08. And we are reaffirming our operating margin guidance in the range of 16 to 18% compared to 17.4% in '08 as we expect lower fuel prices to offset lower RSAM projections. However, we are not expecting to come in at the high end of the range.

With that, I'll turn it over to Pedro for closing remarks.

Pedro Heilbron

Thank you, Victor. And again thank you all for joining us today. Our fourth quarter and full year results are a testament of our company's abilities to deliver world class results, both in favorable and challenging environment. And you have seen from our updated guidance for 2009 we expect no lag. Our team is committed to taking on the challenges that may lie ahead, monitoring the demand environment and making adjustments as needed, but very confident that our company will once again deliver industry leading results.

At this time, we will be happy to open up the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions). And our first question will come from Ray Neidl with Calyon Securities.

Ray Neidl - Calyon Securities

Hi, good morning.

Pedro Heilbron

Good morning Ray.

Ray Neidl - Calyon Securities

Basically, just a couple of overview things. One is Lon (ph) is talking about doing a freight carrier in Colombia and I heard rumors I don't know if its true or not that they are thinking about starting a passenger carrier in Colombia. And I am just wondering have you heard any thing. And if so, how that affect your Aero Republica operations?

Pedro Heilbron

All we heard is about the cargo carrier which we understand its set to go for a later in this quarter. And we've heard of no plans to start a passenger operation and we think that Colombian markets are very saturated in terms of passenger carriers. How is the cargo operation going to go for them I don't know but this are obviously challenging times for cargo.

Ray Neidl - Calyon Securities

Definitely, even all yours -- your cargo operations were up, congratulations on that. Secondly, and I guess this is tied in with -- your cargo revenues being up, as the Panama economy you mentioned would be canal construction, its going to pump dollars into the local economy. What's the economic growth forecast for Panama now right now, last I heard was 8% I am just wondering if that's come down or not?

Pedro Heilbron

That's come down to between 4 and 6% depending on who you ask but that's what the analyst and experts are coming up with. And there is a number of major projects, government infrastructure projects that are going on, besides the Panama Canal expansion of course. And even the construction sector, its strong right now it may slow down towards next year, but right now the projects are being worked on and are going to be finalized, so that's keeping the economy going.

And a consumption, its also okay; so we think that there's going be a softer landing in Panama, it's going to obviously slow down from double digits to mid-single digits but much better of what we're seeing in the rest of the world.

Ray Neidl - Calyon Securities

And that's supporting your cargo operations when I check it?

Pedro Heilbron

Our cargo operation I should add that is not significant, it's mainly based on using the daily space of our aircraft. I wish we have usually spilled cargo because the belly space is obviously limited. And we do charter small narrow body cargo aircraft but that's just to complement our daily capacity. So when we think of cargo profitability which is not a number we disclose but we will see cargo as a big headache for us right now. Again, because it's a small part of our business and it's not a lot of capacity while we flow out there.

Ray Neidl - Calyon Securities

Okay good. Thank you very much.

Pedro Heilbron

Thank you Ray.

Operator

And our next question will comes from Mike Linenberg with Banc of America.

Michael Linenberg - Banc of America

Yeah hey, good morning guys. A couple of question here, when we look at Aero Republica very strong margin in the fourth quarter, what -- can you just talk about, over the last since you purchased the company, I mean we've seen improvement in the margin certainly, there is the seasonal benefit here. But what else is driving that strong margin, is some of that the competitive back drop in a sense that the capacity situation in Colombia is may be a bit more stable today, or is it also being as a lot of it being driven by the new airplanes moving in, maybe its the Embraer-190s, or the right airplanes the MD-80's were too big, I mean any color on that would be helpful.

Pedro Heilbron

Okay, it's probably most of the above, but first I would say that this is a company that over the last three years, it has improved itself in all areas, its now a very well run company with high on time performance; a very efficient in its over head and structure and all of that obviously result in better margins. I believe there is a big impact on the season, it's their highest season of the year so obviously that has to help.

And then we have then moving to this the right sizing to a smaller gauge Embraer, so I think for the quarter we said 63 or so percent of their capacity was shown on the Embraer but there is a big advantage there, flying 63% on brand new Embraer by the end of this year it will be 100%.

And also their move to more international flying, 25% of their flying or their revenues for the first quarter were international, where we have higher yields and very load factor, so it's a combination of all those things.

Michael Linenberg - Banc of America

Okay, okay good. And then just my second question, when we look out into now we're mid-February and you are probably getting a pretty good view on how March is shaping up. How are revenue trends, how are they trending, I realize that maybe the booking curve has shortened that seems to be what we're hearing from a lot of other carriers.

And what are you seeing on the pricing side, and I guess we probably have to be mindful of fact that may be a sizeable chunk of your fare structure did include a fuel surcharge, and so as fuel prices come down that's obviously having some impact unless you've had successes in being able to roll that into the fare structure. So any commentary on what you're seeing on the revenue trends and pricing would be great.

Pedro Heilbron

First of all Mike I should say that we're still seeing growth. What we've guided to and what we've mentioned so far that growth -- we see growth slowing down but its still growth, it's still positive.

Michael Linenberg - Banc of America

Okay.

Pedro Heilbron

And I think that's important because another thing that has been seen in other regions of the world. Its we have visibility 45 days out, and that kind of the best we can do and hope to be accurate, but its very difficult right now because historical information which is what we based our sales to make a future forecast. Its not, none maybe as relevant as it used to be when, in a changing environment. It's very volatile, we may see from week-to-week our projections changing.

But we are seeing growth slowing down. We also have the impact of Easter week shifting from March last year to April this year, on this year, so that's also going to have an impact. But overall there are many counties where the currency has devaluated around 30%. We see somewhat of a shift from business class to economy class and that's probably affecting revenues and obviously with fuel dropping so much, as some of the fuel surcharges are coming up, and so on that Victor may be finish the answer.

Victor Vial

Sure. Mike I would just add to that, that obviously when you look at the fuel curve back in November, when we had our third quarter earnings call, we gave preliminary guidance for '09. We look at the fuel curve down recently; there has been a drop of some 30% in the fuel curve so obviously when we look ahead and I was providing guidance in terms of RASM or yield embedding in the RASM guidance.

We are assuming that yields will decrease as some of the fuel surcharges are given back to passengers. However, we do also expect that the drop in fuel prices will more than offset that drop in yield or wrap them. So, what we're seeing right now as we see some markets with lower yield, nothing that we didn't really expect. So our guidance is more based on forward-looking curve on our expectation of yields following that drop in fuel prices.

Michael Linenberg - Banc of America

Okay. All right very good, nice quarter thank you.

Operator

And our next question will come from Morgan Stanley, we'll hear from Nicolai Sebrell.

Nicolai Sebrell - Morgan Stanley

Hi guys, first not many questions, you had 55 jets at the end of the year and the fleet plan now is to have 54 aircraft by year end '09 is that correct? And then the second one, if you could just discuss a little more about the competitive environment that you're seeing now given the difficult financing conditions, I understand some of your competitors having cash issues particularly in Colombia and given that Avianca appears to be for sale; is there any opportunity for you to grab market share there, I don't mean on the M&A side, but maybe taking advantage of the fact that Avianca is has other things to worry about? Yeah that's it, thanks.

Pedro Heilbron

Okay. In terms of fee, yeah we did decide to return two leased 737 at the end of this year, in the fourth quarter. So that's going to have a minimal impact on our growth in '09 but it will make us end of the year with one less aircraft with 54 instead of 55. And we don't think -- we think it's a good move that it will allow us to a better manage 2010 capacity growth. We have the flexibility now to have keep capacity flat in 2010, or grow it because their options and there is aircraft availability now, that was not there six months or a year ago. So we think it's a cautious approach which will allow us again to keep capacity flat, or grow next year depending on what happens with our markets.

And in terms of competition, what we've heard from basically all of our competitors, is that they are not going to grow next year. And we know we have the best balance sheet and liquidity position of any one in the Americas. So we're in a good position and our markets are still growing, even if slowing down. So we feel good about that but we're still being cautious and prudent, so we have no plan to take advantage of any weakness that we're actually not aware of right now in Colombia, and to try to gain market share. We're keeping capacity tight in this year, and for Columbia and in our markets in our other markets we are growing that already we guided for.

Nicolai Sebrell - Morgan Stanley

Excellent, thanks.

Operator

Anything further sir.

Nicolai Sebrell - Morgan Stanley

No, thank you.

Operator

Thank you. And our next question will come from Duane Pfennigwerth with Raymond James.

Duane Pfennigwerth - Raymond James

Hi thanks. Just a follow up on Mike's question. In terms of the bookings that you have and what you can see, what is RASM feel like relative to the down 14 that you've provided in the guidance?

Victor Vial

If you are looking at first quarter RASM on a year-over-year basis. There is a decrease its mostly related to yields but some already its also related to load factor but you talking about 10-15% or so, 10% in that range in the first quarter.

Duane Pfennigwerth - Raymond James

Okay that's helpful. And then on your CASM ex-fuel guidance, why would I guess sort of $0.075 versus $0.072 in the fourth quarter, why would CASM ex-fuel go up next year?

Victor Vial

Yeah. Don't forget that we have the return of the MD-80s during 2009 the so called MD-80s in Aero Republica's fleet, so that's probably the reason we're accounting for the possible cause of return conditions, making return conditions on those four aircraft.

Duane Pfennigwerth - Raymond James

Okay that's helpful. And then could you just review your hedge detail by quarter, your percentage and price?

Victor Vial

Yeah. For the first quarter of '09 we have approximately 36% of our volume hedged. And it's a combination of zero cost dollars with a floor of $112-$113, and we also have some swap hedge fuel swap in the range of 260 and we also have some crude oil swaps more or less around 84. So for the first quarter we have 64% of our volume un-hedged. If you look at the second quarter of '09, 30% pricing hedge -- again you have zero cost dollars using crude oil, with the same flow of $113. And we have another swap of jet fuel of crude oil swaps at $84 and then that's means that 70% of the volume is un-hedged.

Moving on to the third quarter; basically 20% volume hedge, crude oil swaps and around 10% of it at its might be $2 or so. And you have some collars crude oils, collars with a floor of 112, and then for the fourth quarter we have hedged around 12% of the total volume and most of it is basically swaps, crude oil plus in the range of $80 or so for all for 2010 there is very little hedging like 5% right now and that's again you see in oil swaps at $83.

Duane Pfennigwerth - Raymond James

Thank you. And I think Jim has a question.

James Parker - Raymond James

Yeah, good morning, it's Jim Parker. Just to pursue where you're seeing some softness in your business and in which parts of your region are you seeing this? And I guess in some of the countries where the currency dropped 30% and major fare went up 30%, is that correct?

Pedro Heilbron

That is correct. And... its hard to say that it's one specific region and its certain concretes and again it's very volatile so it's it almost depends on the week we're looking at. But I think it's very much overall in most of our systems we're seeing growth growing at a slower pace.

James Parker - Raymond James

Okay. And regarding your capacity growth for 2010, you say currently you can have zero growth or you can have some growth, I'd like to know what range you think you could achieve and what's your best guess on what capacity will grow, what rate you will grow at in 2010?

Pedro Heilbron

The range right now that we have this flexibility to introduce growth from zero to a low double-digit. And I think we're probably going to end up like in the middle if everything goes well.

James Parker - Raymond James

Okay, thanks.

Operator

And our next question will come from Jamie Baker with JPMorgan.

Jamie Baker - JPMorgan

Hey, good morning gentlemen. Victor, just a follow-up, you identified three leases that were or three aircraft that were coming off lease this year. Do you know off hand who those are being returned to and does this reflect all of the lease explorations that you are expecting in both units for 2009?

Victor Vial

Yeah...

Jamie Baker - JPMorgan

Do you have any additional aircraft that come off lease?

Victor Vial

Yeah we were mentioning the MD-80s, at Aero Republica, they are being returned to Boeing Capital. And that's something that we are still in discussions with them, that's something that we still have to negotiate with Boeing Capital, in terms of timing and return conditions.

Jamie Baker - JPMorgan

And do you have a schedule of lease expirations for 2010. I am just trying to get a handle on your ability to downsize the plan if conditions require it?

Victor Vial

Yeah, there are two GE aircrafts being returned this year in '09 and there are two more aircraft in 2010, 737 in GE's and that will be returning 2010, that's where the flexibility is coming from?

Jamie Baker - JPMorgan

Excellent. Okay, thanks for the clarification, I appreciate it.

Victor Vial

Thank you.

Operator

(Operator Instructions). And we do have a follow-up question from Nicolai Sebrell.

Nicolai Sebrell - Morgan Stanley

Thanks of taking the follow up. I wanted to ask a little bit more about the jet financing; you said in your press release that you've got at the very least commitments lined up for the aircraft, that you've got coming this year. What, can you discuss a little bit about the financing environment now, how hard is it to finance, how many jets do you currently have in order next year that you still need to line-up financing and what goes into the buy versus lease decision?

Victor Vial

Generally speaking the financing environment I guess its under statement to say that it's the ballpark (ph) we've never seen it. However having said that the aircraft that are coming in our aircraft from Boeing purchase rate from Boeing a... for the two Boeing that we're taking delivery of purchase from Boeing this year we already have preliminary commitments and they should be turning into final commitments in the foreseeable future.

The deliveries are in July and December and we're in discussions already to arrange long-term financing. And given the five that we have support from EXIM, I don't expect any major issues there. Especially given the fact that Copa as Pedro mentioned has a very strong balance sheet and liquidity position.

So in terms of the aircraft next year, we are also in discussions with EXIM, we will be seeking preliminary commitments for those aircrafts towards the middle of this year. This initial indication from EXIM is that we can count on their support. So again, I don't foresee major difficulties in arranging financing for 2010 deliveries either.

Nicolai Sebrell - Morgan Stanley

Okay, great. And how many aircraft do you have on order from Boeing currently looking out forward?

Victor Vial

Yes its two aircraft this year and there is three more aircrafts next year.

Nicolai Sebrell - Morgan Stanley

Okay. And that's as far as it goes?

Victor Vial

We'll talk to that. At 2011, we'll have another six aircraft. And we just took delivery of one GE a week ago.

Nicolai Sebrell - Morgan Stanley

Right. Great, thanks guys.

Victor Vial

Thank you.

Operator

(Operator Instructions).

Pedro Heilbron

Okay and that's it. Thank you everyone for joining us. We look forward to having you back on for our first quarter earnings call. So have a great week. Thank you.

Operator

That does conclude our teleconference for today. We like to thank everyone for your participation and have a wonderful day.

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