Building Latin America's Aviation Future Through Strategic Collaboration

Transcript

Alex de Gunten:I have to say, it's interesting having worked for Pedro Helbram for a number of years, to see him so relaxed talking about all the things that he has done. And one of the things that actually I'm looking forward to speak with with Robert is— please, please have a seat— it's to speak with Robert a little bit about how is it to work for a gentleman who works 24/7 and doesn't sleep.

Robert Carey:I mean, you should be able to answer as well as I can since you have experience there, but— and I think Peter can answer in the category as well, so we can all share our stories on that as the panel goes on, I'm sure.

Angus Clarke:We will.

Alex de Gunten:We definitely will. Well, again, thank you everyone. Thank you, CAPA, for receiving us here. We have a great panel. We have representatives from the 3 major groups in the region, and they added Peter Cerdá in the mix just to balance things out. Latin America is a very large region in terms of mass area. But it's not in terms of population. It's about, what, 5% of the global traffic with a lot of challenges and competing with some of the biggest airlines in the world. That's the background we're playing with. The airlines have had to learn how to work together. It's appropriate that we're here in Panama, Central America, where actually some of the airlines got together many, many years ago to just create a cross-country alliance to be able to survive, to basically do what the region as a whole is doing today. And although the industry is a global industry, aviation is still regulated by country ownership rules, and we'll touch a little bit about that, how that changes the dynamics and forces some of the movements. I'm not going to go and introduce each of— obviously, you know the airlines and the groups, so no need to do that. In terms of the individuals also, you have it all in the app, so please feel free to go in there in detail. I'm going to give a chance to each of the panelists to, for 2 or 3 minutes, just tell us a little bit about what's going— what's new at Delta, at ABRA, at COPA, and at ALTA that the audience would like to hear, and then we'll get into the panel. I'll start with Alex at the end.

Alex Antilla:Thank you for the introduction. Great to be here. Good morning, everybody. I'm Alex Antilla. I oversee Latin America for Delta Air Lines. What is new? I think there's always something new in our industry, certainly in this in this region as well. But in my purview, we oversee all the commercial, financial, and operational aspects of Delta in Latin America and the Caribbean. The biggest piece of that for us is our partnerships and joint ventures with both LATAM in South America and Aeroméxico in Mexico. We're hard at work integrating those partnerships with Aeroméxico. It's been almost 10 years now where we've had our joint cooperation agreement together. We've been integrating at an extremely fast pace. We had some roadblocks and speed bumps recently that we've overcome actually in the past couple of weeks with the government. We can talk more about that if we want. Then with LATAM, it's our newest joint venture across the world actually. We're in the 4th year of integrating with LATAM. Some of my LATAM colleagues are here as well. I personally am based actually in Santiago for that reason, to help accelerate that integration. That's how Delta does our partnerships and our joint ventures. I have colleagues in Europe that are based in Paris with Air France-KLM and in Seoul with Korean Air. That's how Delta approaches partnerships and joint ventures worldwide.

Alex de Gunten:Excellent.

Peter Cerdá:Robert?

Robert Carey:Great. Morning, everybody. I'll say, I think the question is a little unfair for me because we just had Pedro up on stage for Half an hour talking about everything COPA. No, I'm not up here to announce our A350 order today. That'll be later in the afternoon.

Alex de Gunten:You're allowed to talk about other aircraft types at COPA, or not yet?

Robert Carey:We talk about them. We have a lot of beautiful models we've seen of them over the years. They're all there. Robert Carey, I'm the EVP at COPA based here in Panama. You heard a lot about COPA. I've been here about 2 years now. Yeah, I think as Pedro said, a fairly boring model, so nothing super new and innovative, I think, to come in and share. I do think if you look at the past of Copa, part of what we do see and why this topic is very near and dear to us is we did grow quite a bit as a company out of the partnership back in the day with Continental Airlines. We have a long history of working together with other airlines, both deep relationships now that we have with United, our Star Alliance partners, but then also, many of you flew in on probably other airlines here to Panama, and we work with almost every airline that's coming here to the market. It's a core part of our DNA is that connectivity.

Alex de Gunten:Thank you. Peter, you're wearing the ALTA hat today?

Peter Cerdá:I'm wearing both.

Alex de Gunten:You're wearing both hats.

Peter Cerdá:I'm the new alliance.

Alex de Gunten:I was going to ask you a little bit about it because I I see that you seem to be the association. Are you following the airlines? Is this like joint venture between associations or taking over associations?

Peter Cerdá:We're consolidating in the Americas. So yeah, we're the alliance organization for trade associations, so between the IATA and the ALTA. It's a model that we've been in practice now for a year. I think it's going quite well, but as Pedro is in the My colleagues here, we're in a region that has significant and huge amounts of opportunities considering everything that's happening around the world, but we're in a— it's like the World Cup again from a geopolitical standpoint. We have elections everywhere. We don't know where the upsets are going to come, but we're getting hit by different parties and different types of issues from Brazil and taxation to—

Alex de Gunten:Mexico.

Peter Cerdá:Issues about taxi— about, you know, TUAs in Lima. So it's a really interesting time for our region, but it's also a critical moment in some of the decisions that are being made outside our realm of responsibilities. And you see the airlines, how we're growing, and I think one of the great things about our region is we're no longer regional carriers in most parts. Most of the airlines are now global, global airlines in a global world. And I think that's the neat thing that we're seeing in America that we didn't see that maybe when Pedro was 15 years old and he was an intern at Copa.

Robert Carey:Right.

Peter Cerdá:But, you know, it's a challenging time with significant amounts of opportunities. And as a trade association, our main role is to make sure that we can help These guys continue to grow and we make it more accessible for the traveling public in our region. We'll talk more about that. Great.

Alex de Gunten:Yeah, of course. Angus, Abra has been very busy in the last few years.

Angus Clarke:We have indeed. Angus Clarke, Chief Commercial Officer at Abra. I've been there a year at the 1st of October, so coming up to the 12-month mark. No, it's been an exciting 6 to 12 months. We've launched long-haul services at GOL from Rio to New York. We've launched— Lisbon hasn't started. It starts, I think, this Friday. Lisbon is added to the map as well, and we've got more routes to come. On Tuesday night, we announced the launch of our new business class at Avianca. That's also exciting. Lots of good things. On the alliances front, we've signed new relationships with Air Canada.

Alex de Gunten:That's great.

Angus Clarke:So that's a place I've worked at before, so it's a market I understand. So good group of people at Air Canada, and we've announced a partnership with Etihad. So we do a lot of ACMI work with Etihad via Wamos, and that's a very successful relationship we have there. So it's been a busy time, but it's also been an interesting time with the oil price and the Iran war. I think we all feel that. And this— I've come— I've worked quite a few airlines globally, but last one was obviously Air France-KLM, and I think, you know, the premium demand in Europe is different from South America. It's a more price-sensitive environment here, so it's something we have to think about in respect to the oil price. So how long it persists, I mean, it's been pretty damn persistent. I've got to say, which we're all feeling.

Alex de Gunten:Your model, the ABRA model, has been basically investing, owning a lot of the carriers that you partner with. Do you see that continuing in the region, or which way do you see it going?

Angus Clarke:In terms of obviously bringing ABRA coming together, Avianca and GOL and Wamos was sort of niche situation that's turned out very well. And now we're in the sort of final straight on Sky. So I think, you know, the strategy is really centered around going after some of that premium-oriented full-service traffic that is is with another competitor and moving, moving some of that over to us. We're going to have a front cabin at GOL in March next year, so the 737s at GOL will be 2-class. Okay.

Alex de Gunten:Going forward.

Angus Clarke:So you think about long haul, you think about the 2-class configuration we're going to have at GOL. It's almost certain Sky will follow suit.

Alex de Gunten:So you'll be standardizing the product across the different companies?

Angus Clarke:We'll be standardizing the product across the different companies. So we will end up being a carrier of choice for, say, the alternative partners in South America. So if you say Delta and LATAM are together, we're also a choice for American and United. And we're potentially— we've got a partnership with Air France-KLM at GOL. So what we do in Europe, Europe's the uncertain one. It— everyone— Europe and South America is this big open marriage in terms of alliances.

Alex de Gunten:Any interesting tap or no?

Angus Clarke:Not from our point of view. I mean, obviously Air France-KLM and Lufthansa are fighting out that at the moment, and who knows where it's going to end up. I don't think it's going that cheaply, so—

Alex de Gunten:No.

Angus Clarke:No.

Robert Carey:So, yeah.

Alex de Gunten:Excellent. Alex, your model is slightly different from what Abra is doing. How's that? Why one version versus the other?

Alex Antilla:Well, obviously we're a US carrier, so the way we can be in international markets is a little bit different, but it's a model that we've used in other geographies and it's worked really well, which is why the latest investment was here in in South America with LATAM.

Robert Carey:Yeah.

Alex Antilla:And duplicating that model that we have in other parts of the world. And so the strategy that we have is two-pronged. One, it's taking equity investments in these companies to make sure— well, first of all, we take equity investments because these companies are like-minded to us, that they share kind of our values and our commitments. But then with the investments, we have oversight in the corporate governance, seats on the board, things like that to make sure that we are truly aligned from a corporate perspective. Then the second one is doing— the second path is doing these antitrust-immune joint ventures where we are fully and totally economically aligned in everything that we do. In the case of LATAM, for example, we share all revenues, all costs, and so then all profits together. To serve markets that we otherwise would not be able to. Since our JV started with LATAM, in 4 years, we've grown 30% capacity. The example we use is we started São Paulo to Los Angeles. It was a market that's been served many times over the years, presumably unsuccessfully, because that market was unserved when we started flying it again, and now it is sustainable. It's sustainable because LATAM has their strong position in São Paulo. the number 1 position in São Paulo. Delta has the strongest position in LA, the number 2 market in the US. And so we're able to make that work. Importantly, I'm saying we because even though it's a LATAM-operated market, it's as much Delta as it is LATAM. We sit with Kamal's team and make all the same network decisions together, whether it's a Delta flight or a LATAM flight. Again, that encourages growth, and with growth, more supply comes more customer choice, more paths. better pricing, that virtuous cycle starts. It's a model we use around the world, and we're excited to be bringing it to South America just like we've been doing it in Mexico.

Alex de Gunten:Actually, this question, I think, for both Alex and Angus, does the ownership restrictions affect your model? Is it making your life harder, or is it something that you can get around? Because you have ownership, no ownership restrictions in Chile, you don't have any in Brazil, Colombia, I think it's open.

Alex Antilla:Ours is— they're distinct paths. We have ownership equity stakes in companies, but then our joint venture is restricted to the scope that we have approval. With LATAM, it's between the US and Canada and the 8 countries in South America that we have been granted that antitrust immunity. All of our discussions are committed to those routes exclusively.

Angus Clarke:Our ownership structure is pretty flexible, so if it's not, we take steps to be legally compliant, but we have no active JVs, so it's— we don't have any scope limitations at this point. Well, we have an arrangement with United that has some scope limitations, but it's pretty flexible.

Alex de Gunten:Okay, and Robert, COPA is a completely different model. We heard Pedro talk a little bit. Room to grow? Lots of room to grow?

Robert Carey:I think, Angus, you used the word open marriage earlier, I think. Maybe, I think that, look, we're very happy. We have a deep relationship with United, which has grown over time pretty organically over time, and that continues to be strong. That led us eventually then into Star Alliance as well. I think the way we view it is we have a pretty unique position here with the Hub of the Americas. We serve from a country of 4 million people, 90 different destinations, which is more than you would naturally think. The ability to offer that service to airlines that want to come here, we view it as a win-win relationship. It's a good chance for the partners to provide connectivity into markets that they otherwise wouldn't serve that are probably too small or too far away for that level of service. We can also increase their frequency to some markets they can't serve on quite as regular basis. It brings benefit to the country because then we get a lot more service than would otherwise be coming to a place and a country the size of Panama. You can see it in the tourism numbers here. The benefits in terms of growth of tourism over the last, especially the last couple years, has been Crazy. You guys will all see it tonight when we're down in Casco Viejo, but it's been absolutely phenomenal. Again, you have 5 international airlines coming here. This winter, Air France is going to add service to Guadalupe. We're now getting the service over like a Miami, which is just, I think, a testament to the connectivity, and it's partly grown out of the fact that the connectivity we can provide to them through our partnership together. I think we view it that way. As you heard Pedro share earlier, we do want to keep it fairly simple and structured. We don't overcomplicate things. We're not looking to have big stakes in other companies or anything like that. Even JVs, I think, when we are generally never going to be the larger carrier in it, it's very hard to manage. Our partnerships, we look at as being trying to make sure that we set them up in a way that's going to be win-win for everybody involved. Then they kind of go Go very naturally from there.

Alex de Gunten:But as the LATAM Deltas and the ABRAs consolidate and become larger, does that squeeze you out of some of these markets? Is there room for the 3 of you?

Robert Carey:Well, I mean, I think we're all existing pretty well right now. Angus and I haven't jumped at each other's throats yet here, so I think we're all good. But no, I mean, The way I'd say it, I mean, as we said, I think we're providing a different service. I mean, yeah, there's quite a bit of connectivity and we're not going to fly in LA to São Paulo. We're going to keep doing pretty much connectivity here out of Panama, but the amount we fly now to, I believe it's 18 destinations in the United States that are a bunch of smaller markets and Delta serves them as well. ABRA has connectivity into these markets as well. We're serving a different market out of there, which is the ability to connect the 2 different points, both in the north and the south, that yes, there are ways to connect them, but it's really providing that one-stop connectivity through the Hub of the Americas that I think is the benefit we can bring that fits nicely, I think, in between the world of the larger growing JVs, alliance structures of today.

Alex de Gunten:Peter, are these 3 groups working nicely together with the association to They push me pretty hard, so it's never a boring day.

Robert Carey:And we're all completely aligned, right?

Peter Cerdá:Totally, totally.

Alex de Gunten:That's exactly—

Peter Cerdá:alignment is always a non-issue. I think as an industry, commercially, they're going to have their objective, they're going to go hard, but one thing I think, probably more than any other region, when we're looking at as an industry in the contribution that we bring to our region, to our economies, both economically, socially. I think we're all in alignment in terms of what we're looking for. We want to remove barriers. We want to grow organically without regulations that stifle growth. We need the right infrastructure to continue to grow. That's the big challenge that we see, but it's also an opportunity. Many times in our government, and we heard Pedro, and I always use Panama as a perfect example in terms of when you have government, airport, airline working together, I mean, there's no barriers. Growth is just there. That's the big challenge that we have as an industry that in my role at the 2 associations I'm trying to do so that we can have a better environment is how do we change that mindset? That's a challenge that we have with our governments in this part of the world where we're in the business of moving people and cargo. We don't have the same infrastructure that we do in Europe, but you look at the size of some of our countries, Brazil is the size of Europe, but you have infrastructure, you have in terms of highways, rail, we don't have that. Then when you look at our infrastructure in our region, 54% of our airports are either congested or heavily congested. So we're always in a catch-up mode and we have to kind of go around these geopolitical issues. So imagine if we had a Panama structure kind of just duplicated, copied all around the world. I mean, we would have more competition, more people traveling, growing like crazy. And even with all these challenges, we're one of the fastest-growing regions. Until June, we were the fastest-growing region in the world. Again, we have all these geopolitical— now things are catching up, and June was actually the first month that, as every other region, we actually shrunk compared to the year before. But when we look at some of the challenges that we have and some of the roadblocks, I mean, these guys, these airlines, they do a remarkable job Being able to grow, being able to compete. One thing I always love to say, if our governments treated us the same way they treat the bus industry, it'd be great. The buses are subsidized, no regulations, there's no consumer protection. Imagine on an 18-hour bus ride from one place to another, there's no air conditioning, you're not served anything.

Alex de Gunten:I assume you're not asking for subsidies. No, no, no. Okay, I just wanted to clarify.

Peter Cerdá:They wouldn't give it to us. Even in the worst of times, we didn't get a subsidy. When you look at transportation, we don't even have an even playing field.

Alex de Gunten:An equal playing field for everybody. We don't.

Peter Cerdá:That's the big challenge that we have in this part. That's why it's so remarkable what the industry has been able to do. We forget many times the most on-time airlines, 3 or 4 of the top 7 or 8 airlines in the world, are in this region. So we're doing remarkable things, but we're still having to prove to our governments that we're a reliable industry, that we're an industry that actually wants to be treated strategically like a partner.

Alex de Gunten:And we're going to go a little bit later into some of these roadblocks for the industry to grow and how can we work together to remove it. Before we get off the alliance, the joint venture alliances, consolidation, and whatnot. I'd like to hear your thoughts on the alliances, the SkyTeam, Oneworld, etc. What value do they provide now? Do they— are they still relevant in this new environment, or are they just becoming a frequent flyer alliance and everything else is done Alex?

Alex Antilla:No, I think there's tremendous value. I mean, we're a proud member, founding member of SkyTeam, and there is value to it. But there's layers to partnerships, and we've seen a lot of value with certain partners going deeper for strategic geographic reasons. So no, I think the short answer to your question is there's absolutely value. It's broader than just frequent flyer for sure. There's still a lot of customer experience opportunities within kind of the broader SkyTeam alliance, as I know there is in Oneworld and Star as well. But our model of JV partnerships is one level deeper that also has a place. So I think they complement each other.

Robert Carey:Yeah, I would agree. I mean, I think, look, if you think about something, you know, like, you know, as Alex is saying on Sky, I mean, similar with Star, especially for, you know, take a position like Copa. Star allows us to give to our passengers, A, it's a way for other customers all around the world to recognize COPA and probably be introduced to COPA in a way they wouldn't when they're traveling in the region. 2, if you think about it from our customer perspective as well, it opens up a broad network of carriers when they're traveling all over the world. I think if you think about it, especially from that customer perspective and what we can offer and expand both in terms of network, product consistency points, and also Recognition. Maybe this is somewhat frequent flyer, but for our top frequent flyers of the world, the recognition that you get across that as a Star Alliance Gold member, et cetera, it's very valuable. And I think there is a level to it. It's different than a JV. It's very different, but it doesn't mean that different is not bad.

Alex de Gunten:OK. Let's talk about the passengers. How does— how is this consolidation affecting the passengers? Are we helping them? And if so, how? And the reason I ask, and we have regulators in the room, and sometimes they're a little bit concerned about the level of consolidation. What argument would you provide to say, hey, we need more of this? Why?

Angus Clarke:So I think in the case of Abra, I mentioned some of the product attributes that we're delivering. Now, we want— we're going to keep the brands separate, we're going to keep the AOCs separate, but we want the customer experience to be consistent end to end. So if you're going between Bogotá and São Paulo, for example, you effectively won't mind whether you're on a GOL aircraft or an Avianca aircraft because the quality of the service and the way you buy the tickets, the way you change the tickets, and the way you earn miles will ultimately be consistent. So Part of me joining Abra and having come from Air France-KLM was to bring a bit of that experience with me to implement that at Abra. So that project in particular is going pretty well, but I think it's important. I think we do— even though the markets don't have that much natural overlap, Brazil is a great area to pull traffic over Bogotá to send north and, you know, really utilising the customer base of GOL to build traffic on Avianca's flights and GOL's flights flying into Bogotá is a great opportunity for us. So we want the Brazilian consumer flying on Avianca to feel like they're getting comparable treatment as if they flew on GOL. It's a journey, but that's the ambition. And same with status recognition in terms of GOL's loyalty program when they're on Avianca and vice versa. So ultimately, we're going to keep the brands separate, so we're not becoming LATAM. But at the same time, we want the product consistency that LATAM delivers, which we're on the cusp of getting, to be available to the customer base of airlines within the group of ABRA. And the same thing will end up happening at Sky. It's early days, subject to the final closing of the transaction. But we want the consistency across the network.

Peter Cerdá:Excellent.

Alex de Gunten:And I mean, ABA has done a great job all through the lower Latin America. Mexico, any plans, thoughts?

Angus Clarke:Look, I would say at this stage, let's successfully digest what we have and go from there.

Peter Cerdá:Perfect. Yeah.

Alex de Gunten:Actually, we have some questions. I have some more questions, but I wanted to encourage audience participation. So if there's a question from the audience, if you're brave enough and want to challenge the panelists face-to-face, feel free to just raise your hand and we'll get a microphone to you. If you want to throw a really hard curveball, put it on Slido.

Peter Cerdá:Yeah.

Alex de Gunten:They're anonymous, so you can send anything you want, and I'll start with one that they already— that's already in there. As partnerships proliferate across Latin America, where is the value actually being created? Network breadth, revenue quality, or cost efficiency? And what metrics should boards use to decide when collaboration is worth the added complexity?

Robert Carey:Alex?

Alex Antilla:I'll start maybe. I think all of those things, but I would add also product quality to that. I think as networks grow, as we— as our partnerships get deeper, we're learning from each other and we're getting better across all of those things. So it's network breadth, revenue quality, cost efficiency, and learning best practices on customer experience. With our partnerships, we always say 1 plus 1 is more than 2. So Delta and LATAM, as a customer, you should get more than just Delta plus the 2 brands together. You get more than just those 2 together, that you get the benefits of the Delta brand, you get the benefits of the LATAM brand, and you don't really get any downsides to that. And so that manifests itself in, I think, the breadth. We've talked about that, the growth that we've had, the revenue quality, of course, cost efficiency. We're learning a ton from LATAM on how they handle costs. They're extremely good at that. Then onboard in the airports on the product side, I think there's a lot we're learning from each other.

Alex de Gunten:Excellent. Let's switch a little bit and let's talk a little bit on the— not the passenger and the commercial side, but on the cost side. The industry has gone through some significant challenges. Pedro mentioned in terms of getting aircraft, getting parts, supply chain. What's, uh, how's the alliances, how's the, the, the collaboration between the different groups, uh, helping in that area? What are you working on?

Angus Clarke:So I'd say one of the most obvious benefits for us, and I, I think a lot of people in the airline industry recently have experienced this, the engine manufacturers have become very tough to deal with in terms of the cost, cost per hour, cost per cycle. So I think one positive outcome, which we announced at Farnborough, was renewed relationship with GE. So we've now used the ABRA umbrella to negotiate on CFM56-5B, 7B, and LEAPS for GOL and Avianca. So we're getting significantly better outcomes due to the umbrella negotiating as one.

Alex de Gunten:It's kind of reminiscent of what TACA And LATAM and TAM, I guess, did many years ago, but not with the engine manufacturer, but with the aircraft manufacturer, where they got together and created enough of a volume to be able to mandate or at least to balance the relationship.

Angus Clarke:And yep, it's— look, I'd say the only other nuance, we're clearly not going to send A320s to Brazil or 737s to Bogotá in terms of fleet swaps, but Could that happen? No, it's not planned at this stage.

Peter Cerdá:Okay.

Angus Clarke:So we don't want another type mixed in the narrowbody network of each airline. But again, subject to the closing on Sky, I mean, Sky's obviously got an Airbus fleet. We could look at seasonality. You get different seasonalities in the north versus the south.

Alex de Gunten:So we could easily look at some opportunities there that could Would the regulations allow you to take, you know, Sky Airplane when they're in low season to Northern Oregon?

Angus Clarke:Let's assume you'd re-register the aircraft, and we'd have to do some work with the regulator to make sure we can grandfather over the sea check time and all that sort of thing, but that's been done before. My old company has the Transavia business, and they used to send aircraft to Canada and to Brazil sometimes, and you preserve the sea check time. That's the key.

Robert Carey:Robert? I think in terms of what the power of the size and scale can bring, I think the other dimension we see is also just on the knowledge it can bring. It's not just always a supplier, let's say a pure supplier and procurement play, but it's also How we can learn from each other in partnerships. I think that's probably— we talked about it in the past with our Continental relationship, but even today with United, we have a good relationship with them in the sense of when we're facing a joint problem, or maybe not even a joint problem, but a problem we're commonly facing, probably is a better way to say it. We can share information across the 2 airlines, not price information, just to be clear for the regulators in the audience today, but more when you're talking about technical standards, Maintenance-type issues, supplier relationships, and what's working and what's not working, some of these fixes, some of these new and unique areas. The other big area, and I think I'm sure Alex will have a bit of a point of view on this as well, is also when you're thinking about technology, data, digital as well, and the applications there. Where can we be thinking about what's working, what's not working through different applications and ways of reaching customers? Especially for a smaller airline like Copa, it's really beneficial to have partners We can reach out to and find out, you know, a lot of our partners have a lot bigger R&D budget than we do, and we can benefit from them and learn from them quite a bit, which allows us to stay more competitive.

Alex Antilla:No, I agree. And yes, we talk a lot about digital. In fact, we had a Delta team down in Santiago a couple weeks ago talking about digital and app enhancements and things like that. The other thing I'll add that we launched with Delta Latam recently is a separate joint venture, separate cooperation agreement specific to MRO that's in Brazil, and it just shows the power of these partnerships. It's broader than just traditional, you know, network planning optimization. It really spans the organization, and creating a JV-type structure in the MRO business is really first of its kind and potentially is, you know, opens up a whole host of other opportunities.

Alex de Gunten:Excellent. And Peter, you mentioned infrastructure. What is the one item that is restricting the growth, the biggest item that's restricting the growth of the airlines in the region?

Peter Cerdá:From infrastructure? It doesn't have to be infrastructure. I think infrastructure is probably one of the areas that we're— probably the biggest priority that we have. We're always going to have the geopolitics. In our region, we love governmental conflict and change. You know, we'll have 4 years extreme right, then we'll have another 4 years extreme left. We're used to that, and the industry acclimates to that. It's difficult to acclimate when we're seeing more airports are more restricted with less space, and we as airlines, or the airlines, are growing more rapidly with more ambitious plans and And with JVs and partnerships being able to grow. Why is this such a big challenge? Building a new terminal, you can't do it in 12 months. It usually takes years of planning. Building a new runway takes years of planning. We saw what happened in Mexico City. We had an airport that was a couple of years in the development. A government comes in, decides to eliminate it, and then— And then what? creates a new concept, and 4 years down the road, we're still trying to understand what the concept is all about. One of the challenges that we see every time we're opening a new terminal or we're making it bigger, within months, we find ourselves— we're saturated.

Alex de Gunten:Already behind.

Peter Cerdá:Why? Governments will say, well, you have a brand new terminal. What they don't understand is that we had such a significant delay in trying to create that new capacity. Now that we're putting it in, we find ourselves that we've outgrown it very quickly. I think we should take a little bit of blame in this because I don't think we've done a very good job as an industry, as an ecosystem, in planning for the future. Now, COPA in Panama and Tucumán are the exception, so we'll keep them out.

Alex de Gunten:Yes, I was wondering if COPA would be willing to do a road trip with their authorities and go to the other countries and say, this is how you should do things, although that would go against your own business model.

Robert Carey:Yeah, I mean, we'd have to get pretty good commission payments.

Alex de Gunten:Yeah, I was going to say, yeah. I think what's happening in Peru with the in-transit— what is it— the fee or tax, it's bad for the industry, but it's good for COPA.

Robert Carey:I mean, I think from an industry— as you said, it's not good for the industry. We don't think it's a good Good business overall. And so, I mean, no, I mean, we don't really see it as a benefit.

Alex de Gunten:No, I agree.

Peter Cerdá:And I think it's a struggle because as we continue to grow our hubs, we're going to find a point in time we just won't be able to grow. And it won't be so much because of the hubs, although that's the primary reason, because also our secondary airports are not growing. And our secondary infrastructure is becoming more relevant every day.

Alex de Gunten:Yeah.

Peter Cerdá:Because we're looking at growing in those markets either domestically or internationally, and we see these airports, you know, you go to Colombia, Medellín, Cali, Cartagena are exceeded the capacity. You go to Peru, you go to Argentina. So we find ourselves that we're in a place where we want to grow, we're able to grow, our hubs are saturated, our secondary markets haven't grown as quickly, And the planning for the future, it's always very short-term and we should be planning 25 to 35 years down the line and what it looks like we're planning for the next 10 years, the next 5 years. And when we do plan for the next 10 years, once we get to 5 years, we reach that point without growth.

Alex de Gunten:And I was joking on, you know, on the COPA, but being able to replicate that model would have such a big effect in the region if you're able to really work together. I know it's not easy. I know you have the fights with the government. I know you have the fights with— but at least there's a common long-term vision that the rest of the region does not have. We have a couple of questions. Let's talk about— we haven't touched on Venezuela. What do you see in Venezuela happening in the future? We see that Copa has been all in and expanding service, but it would be interesting to hear the other perspective. Alex or Angus?

Angus Clarke:Venezuela, when it opened up again, became instantly a good market for us. Obviously, the earthquakes, a significant tragedy, but the market is still resilient and coming back. Obviously, it's moving back into Caracas well with the reopening.

Alex de Gunten:What percentage of What your operations before Venezuela, before at the peak versus now?

Angus Clarke:It's, uh, it was pretty stable, to be honest with you. We just moved it to Valencia, so it, uh, the, the double daily from Bogotá, um, so, and the planned service from Medellín, we held back a bit. Um, but it's, it's, it's because it's, it's going back in, it was sort of new growth. Um, so it It was something new this year for us in terms of a profitable growth market. But no, I mean, it got slowed up a bit, but I think we're going to see it come back nicely. We're very optimistic.

Alex Antilla:Yeah, it's really exciting. And I mean, we've gone 45 minutes and haven't talked about Venezuela. That's how dynamic this region is and industry. I forget the stat exactly, but before, I think Venezuela and Colombia market sizes were basically the same. And now Venezuela is a fraction of it. So I mean, the growth potential is huge. We have a lot of plans at Delta to serve Venezuela. Obviously, things are being worked out, and the earthquake just put things back a little bit, but it'll be a big market, I think, for the industry going forward.

Alex de Gunten:And the next question is for Angus. With both American and United involved in some way with ABRA, who will be the US partner?

Alex Antilla:I've been up here, so this is not my question.

Angus Clarke:So I think, I think if you look at dynamics with— I said open marriages in Europe. It— we certainly have—

Alex de Gunten:A threesome?

Angus Clarke:Yeah, well, something like that. But no, look, it's, you know, United is a good partner to us when we're obviously in Star Alliance at Avianca, and when we turn up to their US hubs, it gives us very good beyond-network reach.

Alex de Gunten:So no plans to I mean, it's been done before. If you look at Alaska, Alaska was partners with everybody. Didn't care whether competitors in these routes and partners with you and the others. So the model is out there before and it's worked well for them.

Angus Clarke:So no, absolutely. I was just gonna say, GOL and American have a very strong relationship there. They're supporting our Rio-New York flight. So I think, you know, no, again, no plans to change anything with American. So at this stage, it's going to remain There's also nuances that American has an exclusive relationship with JetSmart, so we, you know, it's not— yes, the Spanish side of the equation isn't really available anyway. So we're happy.

Alex de Gunten:Excellent, excellent. Authorities, collaboration with authorities. Do we do or can we do a better job with tourism to— because the region, it's a region but it's got lots of different things to offer. Are we doing a good enough a job with the tourism and the industry? And Peter, I'll let you start with that one since you're involved.

Peter Cerdá:I think if Pedro was here when he was 15 years old starting the airline, it was probably the same question that we have today. If you look at tourism in the region, significant, significant opportunities. I don't know how many Brazilians there are here. Last year there was a record year in tourism in Brazil. It was 9 million people, and that was record. Spain has 94 million tourists a year. So when you have Brazil, which is the size of Europe, 9 million, we're celebrating, but when we start comparing to other parts of the world, You begin to say, wow, we have an opportunity. Post-pandemic, just about every country, every government said tourism is going to get us back on our feet. We're going to really be— well, it's been several years and very few of those governments have actually walked the talk. Because if you want to stimulate tourism and have air transportation play a major role, you have to compete. But when you're increasing taxation, and fees, not building infrastructure. In Brazil, they're about to implement a new tax reform, 26% from 9%. We're not going to grow in Brazil if this goes into place. We will actually shrink in Brazil, and if Brazil shrinks, the rest of the region shrinks. So how do you stimulate connectivity and tourism when you have governments— And we're not going against the tax reform. We understand it's important. But the way the industry is going to be impacted, that's going to have significant impact. You look at Argentina that has done a great job in stimulating new regulations. It's still a very expensive country to go to. So we need to really have governments understand the power that travel and tourism can have, but they have to create a strategy. You have to create the platform to be able to go out and compete. You know, 10 years ago when you were at ALTA and we were talking about the region, Brazil was competing with Chile, Bogotá was competing with the Caribbean. Today we're competing on a global scale.

Alex de Gunten:Absolutely.

Peter Cerdá:We're competing with, you know, safaris in Africa, with oceans in Australia. We're just competing on a global— and with internet and, you know, all the information that's available, anyone can be anywhere in the world. With one stop, just about. And when you look at competition pricing, we're still an expensive region. And it's not because of the industry, because airfares have actually gone down 60% in the last decade. The problem is fees and costs have gone up, and that's what puts us at a disadvantage.

Alex de Gunten:Absolutely. Well, we're running out of time, so I don't see any hands up or microphones out there. So I'll let the panelists, if they want to ask each other a question or any comment that we haven't addressed. I see silence, so— I'll throw the last question. This has to be a yes or no answer. You cannot— and that's going to be hard for Peter not to talk. He only can say yes or no. Is, will there be fewer major airline groups in Latin America 10 years from now? than there are today? Yes or no? Will there be fewer major airline groups in Latin America? And I'll start with Alex. Yes or no?

Alex Antilla:I'll say no.

Robert Carey:No. I'm going to go no.

Peter Cerdá:No.

Robert Carey:No.

Alex de Gunten:Okay. Well, we have consensus on that. I asked the same question of AI and it said yes. So careful, it's going to take over the world.

Alex Antilla:Yeah, that's right.

Alex de Gunten:So again, please, Give a hand to the panelists, Angus, Alex, Robert, and Peter. Thank you very much.

Angus Clarke:Thank you.

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