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Copa Airlines: Tricky Buy, But Business Travel Recovery Can Help (NYSE:CPA)

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Copa Airlines reported its earnings on May 11th. The Panamanian carrier reported results that were impacted by a spike in COVID-19 cases but remains optimistic about its future results. In this report, I will review the results and perspectives Copa Airlines.

Strong results for Copa Airlines

Copa Airlines results for the first quarter of 2022

Copa Airlines results for the first quarter of 2022 (Copa Airlines)

Copa Airlines’ first quarter revenue was $571.6 million. This represented 85% of revenue for the first quarter of 2019 (before the pandemic). Revenue was mostly lower due to a 12.4% reduction in capacity and slightly lower revenue per available seat-mile, partly offset by higher freight and mail revenue.

Fuel prices rose 12.4% on an 18.1% decline in gallons consumed, offset by a 37.4% increase in jet fuel prices. Lower gallons were consumed at the cost of fewer hours of operation. The simplification and reduction of the fleet has led to a reduction in wear and tear, as well as maintenance costs. The increase in costs is mainly due to the increase in fuel costs. Overall, Copa Holdings posted a net income of $19.8 million and an operating income of $44.8 million, reflecting reduced capacity, staff cuts, fleet simplification and increased fuel costs. Compared to 2019, this is a 60 to 80 percent decrease as Copa Airlines continues to generate lower revenue at a cost level similar to 2019.

Subsequently, there was a slight drop in revenue due to Omicron, but Copa Airlines was unwilling to provide any data on Omicron’s impact on revenue. Costs rose by 27% mainly due to an increase in the number of flights, while fuel costs jumped, which reduced about 37% of fuel cost growth. Thus, there was some headwind thereafter, as more flights did not increase the topline.

Copa Airlines division results for the first quarter of 2022

Copa Airlines division results for the first quarter of 2022 (Copa Airlines)

It is also interesting to see what happens at the unit level consistently as well as over the three years (before the pandemic). After three years, passenger numbers were down about 12% and revenue per available seat mile was still down 2.7%, while the cost of available seat mile or CASM was up 7.5% and down. by -1.6% excluding fuel. Thus, fuel prices pushed CASM up.

Subsequently, there was a headwind due to a surge in Omicron infections. So a 10 percent increase in capacity has impacted revenue per available seat-mile and impacted load factors. The cost of an affordable passenger mile, or CASM, jumped 15.7%. Excluding special items, CASM increased by 4.2% and excluding fuel, CASM decreased by 1.7%.

Keep in mind that increasing capacity can reduce unit costs, but if there is no demand to fill seats, it will lead to a headwind in unit revenue, which is what happened to Copa Airlines in the first quarter of the year. .

Fuel Price Pressure Margin Forecast

Copa Airlines Forecast for Q2 2022

Copa Airlines Forecast for Q2 2022 (Copa Airlines)

Copa Airlines is refraining from providing a forecast for the whole year but expects to be operating at 98% of its capacity in 2019 with a CASM of 5.9 cents, which is…

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