Americas Critical Thinkers - Leading an airline in 2021

Transcript

John Thomas:

Hi, my name is John Thomas and welcome to another CAPA Live event. For this panel, we are delighted to have three of the most respected and experienced critical thinkers in the industry, all from highly successful airlines that have proven the resilience of their respective business models through COVID-19.

Firstly, Dennis Cary, the SVP, Commercial and Planning for Copa Airlines. Copa is the oldest in our group, having been established in 1947, and whose business model is dependent upon being the international hub, the hugely successful Hub of the Americas in Panama.

Next in airline age, we have Andrew Watterson, the EVP and Chief Commercial Officer for Southwest Airlines. Southwest was established in 1971, and is a month away from its 50th birthday, early happy 50th birthday, Andrew and Southwest. Southwest's highly successful business model is based on a single fleet type, primarily, point to point domestic US.

And last but not least Carolyn Prowse, the Chief Commercial Officer of the Volaris, that was only established in 2006, yet, has grown to an impressive market share of over 40% of the Mexican domestic market in the restart since the depths of COVID-19.

So welcome all, Carolyn, how about if we start with you, please. You've obviously seen firsthand the different business models in the industry, having previously been at both British Airways and Etihad. What do you believe have been the key components of the Volaris low-cost model that have helped you weather the COVID storm so well?

Carolyn Prowse:

I think, perhaps, there's three different elements to our ultra low-cost model that have made us successful in terms of the recovery. The first is that we are very focused on leisure and the VFR traffic, the visiting friends and relatives, and that makes up over 70% of our business. And those are the segments that have rebounded more quickly coming out of this pandemic.

I think the second thing is that all of our capacity is domestic or regional. And the domestic network has never really had any travel restrictions, and the US air border, never really closed either, and the testing regime was only introduced in January. So it's only really the Central American markets that were closed for a period. And we're not reliant on connectivity either. So we don't need the whole network to come back.

And I think, perhaps, the final element is that, because our costs are so low, it's given us the ability to be able to stimulate demand with the low base fares, as we've seen the first signs of recovery, but also to be able to make this up in the ancillary revenue. So actually, staggeringly [inaudible 00:03:54] our ancillary per passenger was 36% higher than in the previous year, and it now accounts for approximately 50% of our revenues.

John Thomas:

Wow. That's amazing. The ancillary revenue, again, was meant to underpin the whole economics of the industry, and Carolyn you have just proven it to a T through COVID. So Dennis, Carolyn was obviously talking about the fact that they were domestic focused, and didn't have to put up with all the myriad of dramas going on across all the different government borders. Obviously, you had to weather that storm being an international hub, and obviously dealing with all the myriad of different government's tactical decisions. What do you see as the key components of Copa's hub model that have helped you through COVID?

Dennis Cary:

Yeah, John, great question, and for sure, the fact that our network is, essentially, a 100% international, it's been a huge challenge for us. We were shut down for five months last year, and since September, we've worked our way back up to around 40% of our 2019 capacity. It hasn't been a straight line, and we're not expecting it's going to be a straight line from here, but given the ever-changing government restrictions, I think really the diversity of our network and the fact that we serve so many markets was a critical element through these last months of being able to keep our capacity in that 30 to 40% range.

As one set of government restrictions would increase or a market would get shut down for a period of time, maybe there'd be some relaxation in another one, or we'd see a pickup in demand in some that weren't experiencing restrictions, so that's allowed us to kind of stay in that range. And obviously, now, with some signs of recovery, we're looking forward to getting to 50, 60, 70% and more, hopefully, later this year, but that'll happen as we see the demand come back.

John Thomas:

And Dennis, the model has always been about, well, primarily connecting secondary to secondary in markets that are too thin to support direct. So it sounds like as other players have had to withdraw, that's actually become even more important, your ability to connect those secondary to secondaries.

Dennis Cary:

Yes and no. I would say that's true, but in many instances, the secondary airports aren't open. So for example, Argentina severely restricted, and the only airport that is allowed for international travel right now is Buenos Aires, so we can't go into the secondary markets that we've traditionally served. But yes, in some instances, and I would say particularly North America, where we have a robust network, being able to get into markets that do have less non-stop service, clearly, just part of our business model, that advantage actually is hampered a bit at the moment, because of the way the government restrictions are playing out in a bunch of key markets.

John Thomas:

Right. Right. And Andrew, clearly Southwest entered COVID as, financially, probably, one of the strongest airlines in the world. But what do you see as some of the key components of the Southwest model that have helped you weather the storm so well?

Andrew Watterson:

I think the two things that really gave us a boost are our financial strength and our employee engagement. So [inaudible 00:07:35] strength, we are a investment grade credit rating airline, which is the only one in the US and there's not many in the world. And so, that allowed us to quickly raise money without having to use collateral or innovative financial instruments with high interest rates. And so, very quickly and very low cost, we were able to get a cash war chest to make it through whatever was to come.

And then in employee engagement, as an airline, often your biggest cost is labor. And so to get our labor costs down, we were using both of these measures. We were able to offer our employees, if they want to take six, 12, or 18 months off, of extended leave, we paid their full benefits and health insurance, they accrued leave, and continued to accrue leave, and then offered 50% of their salary. And they can go do whatever they want work somewhere else. And so that allowed us to get our costs down.

And so, the employee engagement of wanting to help the company, as well as those who just didn't feel comfortable working in this environment, got our cost structure down. And then the ones that stayed on the line, we had a couple of things going on. One was what we call the Southwest Promise, which was our kind of multi-layer approach to keeping our employees and our customers safe. And they enthusiastically implemented these measures, so our customers, who generally trust our brand, because we are fairly good with our promises, then felt very capable with flying Southwest Airlines. So the traffic that was available during this period of time kind of migrated towards us, because of that offering.

And then I think lastly, one of our other ways of getting through this was to diversify our network. We had about a 100 stations at the beginning of this, and by the end, we'll have open to at least 17 new stations. And so, that's obviously a lot of work frontline, back office. And so the enthusiastic response to do, maybe five years of station openings in one year or less, really came from our employee's engagement. So financial strength, employee engagement has served Southwest well over the last five decades and did again during COVID.

John Thomas:

And obviously, Andrew, a lot of the difficult part is not necessarily being in a dormant state, but it's actually, how do you ramp? And obviously, a couple of airlines have sort of stub their toes in the restart, had canceled flights because of lack of crew and all that. Presumably, one of the key successes of that employee engagement through that period has allowed you to restart a lot more seamlessly than perhaps some of your competitors.

Andrew Watterson:

Yeah. We're very fortunate. I think it's the employee engagement and I think some good planning, and our headquarters staff will be just down to about 4% versus 2019 here next month. And so moving back up was, I think, fairly seamless. On the way down though, that's actually more difficult, if you want to shut an airline down like that, that's actually a lot easier than just going down to 10 or 20%, because things would foot at 10 to 20%. So that was more hair raising, though I have no hair, in the beginning, but the ramp back up, I think has been with force.

John Thomas:

Right, right. Excellent. So a lot's been said about the apparent divergent levels of government support throughout COVID both direct government support and indirect. I suppose, Dennis, you're the most exposed to the various governments, can you talk about the role of government or lack of role of government in supporting Copa through COVID?

Dennis Cary:

Yeah, sure. I mean, I think as with most governments throughout the world, and certainly throughout Latin America, the Panamanian government simply was focused on battling the Coronavirus and not really in a position to provide financial support to Copa or any other Panamanian companies. And frankly, we had the financial strength and the heritage of how we manage the company that we didn't expect it, did ask for it. And as Andrew mentioned, we kind of went out and did some financing on our own to build our own war chest.

But I would say on the flip side, the Panamanian government and several other governments in the region definitely recognize the value of aviation, and while it wasn't always easy, I think many of the governments in the region that we serve really worked hard with us, and with the industry as a whole, to find ways to get every nation restarted.

And so we have a long way to go, to get back to full strength, to have higher levels of coordination and consistency of policies and a lot of things that we want to achieve. But, hopefully, as we see the virus come under better control in the coming months, we'll see the relaxation of, of restrictions. And, for sure, again, I think, the big opportunity is, is just having a more consistent approach, be it testing or what have you, it's really the complexity of the subtle differences in how these policies get implemented by the various governments that makes it so challenging. If you're a Miami agent for Copa and you have passengers traveling to 15 destinations and coming back from 15 destinations, making sure you get all of that right is a challenge.

And so that collaboration among governments, facilitated by IATA and ALTA in some of our partners, I think is something we're still pushing quite a lot. And then the last thing I would say is, hopefully, we can get the aviation and health authorities in the various governments to really engage in technology, health passports, and the like, that even if they are somewhat too late to really have a big impact during this event, hopefully, prepare us better to be able to weather and continue aviation through any subsequent, big global health event like this.

I think we can all see that having digital validation of tests and vaccines and other health records that have the appropriate privacy and control for the consumer, would be such a powerful enabler of restarting and accelerating the restart of travel. And like I said, whether it's still can have an influence depending on the path of COVID-19, we'll see. But I think this experience has highlighted the fact that we need to modernize that part of international travel.

John Thomas:

Yeah. Yeah. I mean, it's amazing that people keep talking about the passport and this new thing. And I keep reflecting back to the '70s, where we all had our little WHO yellow passport that had our typhoid injection and all that saying that we're trying to-

Dennis Cary:

'70s John, it's still in my passport, what are you talking about? It's still in my passport.

Andrew Watterson:

Yeah, I got mine.

John Thomas:

Everyone keeps talking about these-

Dennis Cary:

That's the technology we have. That's why it's crazy. We've got to come into the next century.

John Thomas:

Yeah, exactly. I mean, it's 40 years ago, and we haven't really come much further than that.

Dennis Cary:

That's right. Right.

John Thomas:

Carolyn, how about the role of government in Mexico?

Carolyn Prowse:

I'd say, I mean, Dennis talked about the difficulties of different policies from different governments. And we're fortunate in that the Mexican government has actually had pretty consistent policies throughout the pandemic, and they've actually taken into account the impact on the Mexican economy and tourism. So key tourist destinations like Cancun, Playa and Cozumel, they never really closed. They were just really clear about the restrictions that were put in place, in terms of the biosecurity protocols and the maximum capacity.

On the flip side, we have had no government loans or support financial aid either. But I think this to some extent, has helped us, because it's meant that all the airlines in Mexico had to be extremely competitive to survive. As a result, our higher cost competitors have to cut back capacity and it's really left some market opportunities for us.

In the last year, around 30% of narrow bodies have left the Mexican market. And Mexico City, which has always been constrained, capacity constrained has opened up. So we've been able to launch new routes, as Andrew was saying, they're doing the same thing, but we've really grown capacity in Mexico City Airport, and we've actually got more capacity there now than we had April 2019, and we've gained 10 percentage points of market share. So for us, it's somehow enabled us to get the growth that we wouldn't have been able to get otherwise. And [crosstalk 00:16:49].

John Thomas:

In a counterintuitive way, it's actually kept the playing field very flat or very fair.

Carolyn Prowse:

Yes. And I mean, two weeks ago, we actually announced that we were incorporating a further eight aircraft this year. So we're incorporating 10 net new aircraft into our fleet this year, in 2021. And we continue to examine additional opportunities.

John Thomas:

Right. Wow. And Andrew, the role of government through COVID in the US?

Andrew Watterson:

Yeah, we've been very fortunate and we're very grateful for the US government support. The US government gave several rounds of direct financial aid to airlines, the acronym used was a PSP. Payroll support plan. And so what that did is it gave grants and loans to airlines with a couple of caveats. One is you must maintain your payroll. You can't lay anybody off or cut their pay rate. And then secondly, you had to maintain service to all the domestic cities, which you served or ask for dispensation. And so, we've honored that, both the spirit and letter of the law, some airlines cut hours, so they didn't technically cut pay rate, but cut hours. And we maintained full employment, and also we're the only airline not to ask to cut any routes.

And so we kept flying to all the cities across the US, which we already served. Sometimes we'd have one person on the flight, two people, but those people had a story. They were traveling for a very good reason. And so the US government, I think, wisely wanted to keep a network going. In a country, which has got a kind of decentralized population base, you need air travel for not just commerce, but for other doing business, whether it's healthcare, it's personal needs. And so, I think the US government got a good return for that, in exchange, the airlines kept operating, and were kept liquid. So once, again, we're very fortunate and feel very grateful of the support we got.

John Thomas:

Yeah. I mean, I know a lot of people outside the US sort of cite the support that the government gave, but to your point in effect it is really supporting employees and supporting full employment.

Andrew Watterson:

And continued air service. The employment got the headlines, but the air service, I mean, you had to keep flying and that incurred not just employment costs, that incurred gas, landing fees, so all kinds of extra costs that went along with that, which the payroll support act didn't cover. So the airlines spent incremental money to fulfill the terms and conditions of the aid, but net net, it was still very generous, and we're very grateful for it.

John Thomas:

Right, right. So you've all had very long, well, not very, you've all had long and successful careers in the industry, and obviously, fully conversing with all the different business models. But clearly there are aspects of the industry that cut across the business models that just sort of, it's airlines 101, how do you run a good airline irrespective of the business model? So Carolyn, what was some of the key actions deployed at Volaris that you'd ascribed to just being a good airline or a well-run airline, regardless of the fact that your business model is as a low-cost carrier?

Carolyn Prowse:

Yeah, I think there are some things that are common across the different business models. And I think, perhaps, the most important for us was having a really flexible mindset and the ability to react fast. So we were able to ramp down capacity, it's tricky, as Andrew said, but we cut capacity faster than the most people, but also we were able to ramp up fast, so again, the first mover advantage. And also changing your approach, recognizing that things need to change, so we redefined the route profitability model. Costs that are fixed and variable when looking at buying new aircraft are not the same as when you're looking at, whether I should park or fly the aircraft. It allowed us to operate capacity that was cash generative.

And I think also being really focused and really clear on the priorities, and not being afraid to change them. So for us, it's also accelerated the pace of the change of digital transformation. We'd always planned to do this, but the issues with COVID meant that we brought forward some of the plans that we'd had to do much more digital customer service. So we have an integrated WhatsApp and Facebook chat bot that came forward, so we weren't somebody reliant on the call center. And we went ahead and implemented, it was quite a bold decision, perhaps, an avatar upgrade and a new website at the beginning of June, overnight. Taking advantage of the fact that we didn't have as many passengers as normal. I think, perhaps, focusing on the core and not getting distracted is key.

John Thomas:

Well, I mean, and you raised another really good insight, because I suppose the natural is obviously cash preservation, but it sounds like you were doing the prudent thing of bringing forward some long-term investments, as you say, are probably better to actually deploy when you actually have a low lever level of activity than when you're at a full level of activity.

Carolyn Prowse:

I mean, I think for some of these the investments were made pre-COVID, and we were and have been, and still are extremely focused on cash. But as Dennis and Andrew mentioned, we were also in the fortunate position of being strong financially going into this pandemic. And then, we had a successful capital raise in December as well. And we're also very grateful for the suppliers that we've work with, who've been flexible in terms of their approach to allow us to do some of these things.

John Thomas:

Right. Right. So Dennis, with Pedro as your CSO, CEO rather, being one of the longest serving in the industry, I think about 33 years with obviously an outstanding record of achievement, what was some of the sort of industry best practices that you deployed at Copa?

Dennis Cary:

And I don't know if I would call them best practices. We were focused on what we thought was necessary to ensure that Copa survived. And I think they were many of the same things that a lot of airline management teams did. Some of the things we've already talked about, raising capital and making sure that you've built the biggest war chest you think you're going to need, and that you're able to build, just to weather the storm. Because early on, and even now, none of us quite know exactly how the path is going to go back to profitability, at least in our case. And part of that then is cutting costs as fast as possible to slow the bleeding. When you're in a cash negative position, you've got to do things fast.

But I think, if you tie those two things together, the third thing, and in some ways, akin to what Andrew was talking about in terms of employee engagement, we spent a lot of time in the throes of the first stages of the crisis, focused on our people and trying to figure out how can we take care of them as best we can, despite the really hard decisions that we have to make. Like others, we offer extended leaves and voluntary programs and had stipends and healthcare support and the kinds of things that Andrew mentioned. And on top of whatever those tangible things were, we put a lot of time and effort into keeping our communication very frequent and very transparent. And we definitely didn't get everything right, but knowing that everyone was dealing with so much uncertainty, and so many people had their lives changed significantly, we were trying to mitigate that impact, but also make sure that we were giving everybody the information and our view of how things were going to proceed so that each one could also try and make the best decisions for themselves and their family.

The whole thing, the whole process was excruciating, in terms of shutting down the airline and trying to weather that storm. But I think now on the other side of it, it gives us all a huge amount of motivation to rebuilding the company, growing back to full strength, and getting our teammates back as fast as we can. So I think that's been our focus in how we've been managing the business. And then as a senior team, we've spent a fair amount of time, even back in the middle of last year, thinking about, okay, which way will the aviation industry in Latin America go?What are going to be the things that customers want and value in that next chapter? And what are our competitors going to look like and offer? And really thinking about, what does Copa need to be in that next phase to ensure that we deliver for our customers and thrive as a company?

And so, managing the business well, communicating transparently and frequently, and then spending the time that we really needed to, to think about, okay, the things that made us successful for the last couple of decades, aren't necessarily the things that are going to be the right ones for the next chapter. And so, let's make some of those strategic decisions and start the pivot as early as possible.

John Thomas:

Yeah. Yeah. And Andrew, you mentioned the employee engagement, and that seems to be a general thing that came out across the industry is that most airlines seem to really double down on employee engagement, but also to Dennis' point, transparent and more frequent communication. But again, Southwest being regarded as one of the best run airlines in the world, what other... you mentioned some of the three core things that we're doing, but anything else, just in terms of best practices in the industry, that you think you also deployed, Andrew?

Andrew Watterson:

Yeah. It's similar to what Carolyn and Dennis were talking about. First one was just matching supply and demand. And usually in our business, when we match supply and demand, it's at the margin. We get measured by like fractions of a percent of some unit number. It's just ridiculous how fine of a difference it is. But now in the COVID world, you're really in chunky terms, like tens of points, if you will. And so you can easily get lost in the, what if, and so what we did is, for each travel month, we said, 45 to 60 days ahead of time, we will decide what the capacity will be for that month, based on observed demand. And what if this happens? What if that happens? It doesn't matter, we'll get a chance to do it again the following month. And so we'd set it then, and we'd prosecute that. And so that religiously matching supply and demand on a rolling basis, is a fundamental of our business, but it just became heightened during COVID.

John Thomas:

And-

Andrew Watterson:

Sorry, say again.

John Thomas:

Sorry, I was going to say, and when we think of the industry, we don't think of it sort of being so nimble. We have our six month schedules and all that, but to your point and to Carolyn's point about, that was actually probably one of the best practices, was those that were nimble, in terms of matching supply with demand.

Andrew Watterson:

And we got some practice the year before with the MAX grounding, which was also kind of on a rolling basis, and we thought that was terribly large. And then, oh, we found out later that it could be worse. And so, we got a little bit practice from the MAX. But then, the other thing is similar to what Carolyn said, is you really need to understand what's fixed and what's variable, because that really then tells you what capacity to deploy. And we are heavily unionized, we're well over 80% unionized, and they have collective bargaining agreements. So our labor costs cease to be variable, they're fixed. And so [inaudible 00:29:22] that much of your cost structure is now fixed, the hurdle to generate cash, to get contribute towards overhead, is actually really low. And so you should actually fly more than one might think wise, given the demand environment. So that allowed us to kind of, I think, set parameters of flying each month that would help produce cash burn.

John Thomas:

Right. Right. Andrew, staying with you, obviously, while COVID has been horrendous for the industry, you mentioned that there were some opportunities that had opened up for Southwest. As you said, you went from a 100 stations to... you opened up 17 additional stations. What other opportunities do you think, specific to Southwest, came out of COVID?

Andrew Watterson:

Well, it's clear. I guess like everybody, we're going to exit a different airline, different network than we went in, and the 17, some of them included airports, we never thought we'd get into. Chicago O'Hare, Dennis' old stomping grounds, we thought, we'll never get into Chicago O'Hare, but like Mexico City in Carolyn's example, the volume evaporated and we were able to get in. We also went into Bush Intercontinental, which is actually one of our original stations. So for our 50th anniversary, we were able to get back to one of our original stations. The same from Miami, they mothballed terminals, and so we're able to get in there.

And so, there's also a lot of smaller and mid-sized leisure destinations we did, that'll still stay with us. But those three in particular, you pair that with a project we'd started earlier, pre-COVID, which was going into the global distribution systems, not to sell the consumers, but to sell to the largest corporations who demand to purchase airfare that way.

And so we're going into more business friendly airports in the East and the Central of the country, we're already there in the West of the country, combined with now being able to distribute to corporations more seamlessly with GDSs, we kept doing that project throughout COVID and now are going live with all the major GDSs. And so we think when that comes together, post-COVID, we will have a better offering to business travelers as well as our enhanced network for leisure travel as well. So we expect to take a bigger slice of the reduced pie of business travel post-COVID. And so, we think we'll end up in a better spot than we were pre-COVID, because of these moves.

John Thomas:

Right, right. And Dennis opportunities that came up for Copa?

Dennis Cary:

Well, I think for us, it's a few things. One was to kind of accelerate, simplifying, and standardizing our fleet. And obviously, that's part of driving our unit costs even lower. While we're totally focused on costs, recognizing that that's one of the foundations of being successful, we've also planned and continued to invest on important parts of our customer experience. Carolyn mentioned digital and the same is true for us. That's been a primary area of focus and continuing investment, despite all of the challenges. We've stopped many things, but not that. And then as we think about, again, that next chapter we're spending a lot of time and effort planning product and customer experience improvements that we think are the right things to do coming forward.

And then, I think we're doing it now and it will continue over the coming months, the real opportunity for us is kind of rebuilding the breadth and depth of our hub. The core of our business is connecting smaller markets that can't support much, if any, non-stop service. Yes, we carry passengers in some of the biggest O&Ds in the Americas, but the core of our business is really connecting those secondary and tertiary cities to the rest of the Americas. And with the pullback in capacity and demand, we think the hub is going to be positioned again to really be a unique business opportunity for us to connect those cities, and reconnect people through our Hub of the Americas.

John Thomas:

Right, right. And Carolyn, Volaris, obviously, by its very nature was a disruptor, and is a disruptor in your relatively short history. But you mentioned the ancillary revenues, which have been sort of someone, with Dennis, being heavily involved in ancillary revenues, it's music to our ears, that 50% of your revenues are ancillary revenue. But what other opportunities came up through COVID for you? You mentioned the 30 aircraft leaving the Mexican fleet, any others?

Carolyn Prowse:

Yeah. I think so. And I think for us, there's still opportunities. There's still opportunities in ancillaries. We launched new ancillaries as part of the response to the pandemic, in terms of what customers were looking for, and we see further opportunity there. We see further opportunity in terms of new markets as well. We've already announced our intention to enter the Colombian market in the second half of this year. And I think something, perhaps, a little bit different, I mean, in Mexico the bus is a much more common form of travel, even for long distances, than air. And we've always had a strategy to get passengers off the buses and onto planes, because the bus market is more than a 100 times bigger.

For us, as well, this was an opportunity during the pandemic, because we have the biosecurity protocol on the aircraft. And of course, on the buses, it's slightly different. So we had a month long campaign, and we'll continue to have, but to send teams into the bus stations to hand out bus survival kits to people about to take a 30-hour bus journey, hand sanitizer, masks, and explaining why they could maybe take the Volaris flight on their return journey.

So I think, for me, there are opportunities everywhere for us, in terms of the demand, the ancillaries, the new markets, and we'll continue to take advantage of it. I mean, both David and Andrew mentioned employee engagement and communication, and I haven't specifically touched on it, but it's a testament to our ambassadors that we've been able to achieve what we have. And that we are currently operating 110% of 2019 capacity, and have aircraft utilization back up, pre-pandemic levels, at 13 hours a day, and I couldn't be proud of the team.

John Thomas:

Right, right. Yeah. No, amazing success story with what's happened in the Mexican market. So we've got time for just one more question, and I'm going to just throw it open to the floor for anyone willing to take it. Obviously, benefit of hindsight is wonderful, but anything that you may have done differently? Just sort of reflecting back on the horrendous last 15, 16 months.

Andrew Watterson:

Well, based on Carolyn's story about the buses, I guess, I could [inaudible 00:36:37] ruthless with competitors. So I'll go back and take and see what else I can do along that vein.

John Thomas:

You're going to get people in the Greyhound terminal, aren't you Andrew?

Andrew Watterson:

Or extrapolate that to air competitors, who knows? But I wasn't as ruthless as I could have been, evidently.

Carolyn Prowse:

I would probably say we would have taken our aircraft earlier, because I think there's always uncertainty and you forecast to the best of your ability. But if you see the second waves coming in and you're always slightly cautious, because you're so focused on cash preservation as well, as to how quickly the market will recover. And I think I'd have taking the extra aircraft earlier than they are coming.

John Thomas:

Right, right. Dennis, anything-

Dennis Cary:

I think you can drive yourself crazy trying to second guess, we got to look ahead.

John Thomas:

[inaudible 00:37:26] forward.

Dennis Cary:

There's plenty of work ahead of us.

John Thomas:

Yeah. So looking forward Dennis, I'm not going to let you off that one, so looking forward-

Dennis Cary:

Oh, well.

John Thomas:

I know you said it's hard to predict and all that, but any sort of predictions on, not cashflow positive or profitability, but just stability, just when do you think we might be able to say the worst is behind, and we're now in a state of stability?

Dennis Cary:

Well, I sure hope the worst is behind us, and it seems like it is. We've all been taught a lot of resiliency in this, so you never can say with a 100%. But I do think, certainly, with vaccination at the level it is in North America and starting to get some traction in other parts of our region, we're seeing demand come back. And so I think it's really, now, and the second half of this year that we'll see, generally positive trends in our part of the world, and in our business. So we've all been guessing for the last year when that will be, and it seems like it's upon us now.

John Thomas:

Yeah. And Andrew and Carolyn, just by virtue of where you are in the market, it looks like you already think this is well behind this.

Carolyn Prowse:

I'd say, no, not necessarily. I mean, the domestic market in Mexico, in terms of demand is still not fully recovered. But I think, I mentioned at the beginning, that for us not the VFR and leisure markets are key. And certainly, we have seen a good recovery in that. I think things are still different from pre-COVID, and who knows whether they'll ever be the same again, probably not. It's just, what is going to come back? And what is going to change forever?

John Thomas:

Yeah, yeah.

Andrew Watterson:

Yeah, and like Carolyn, we placed a big order for aircraft with Boeing. And so, that combined with continuing to match supply and demand, the same market we've developed, we're not going to easily predict the end point of when what's back to normal, we'll just keep managing that fashion and deploying incremental capacity to the demand we see, given our financial situation, which we find to be solid.

John Thomas:

Right. Great. We've run out of time, so I'd like to thank Carolyn, Dennis, and Andrew for your wonderful insights. As always, great insights on today's session. So thank you all and stay safe.

Carolyn Prowse:

Thank you.

Dennis Cary:

Great to be with you, thanks John.

Andrew Watterson:

Thank you.

Dennis Cary:

Thanks Carolyn and Andrew.

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