Q2 2025 Copa Holdings SA Earnings Call
Ladies and gentlemen, thank you for standing by, welcome to the kopus holding second quarter earnings call. During the presentation, all participants will be in a listen-only mode afterwards. We will conduct a question and answer session at that time. If you have a question, you will need to press star 1, 1 on your telephone. As a reminder, this call is being webcast and recorded. August 7th 2025, I will now turn the conference call over to Daniel Tapia, director of investor relations.
So, you may begin.
Thank you, James, and welcome, everyone, to our second-quarter earnings call.
Do I need me today? Our federal Heron CEO of Copa Holdings and Peter dunkers our CFO.
Federal will begin with an overview of our second quarter highlights. Followed by Peter who will walk us through the financial results.
After that, we'll open the call for a question from analysts.
Copa Holdings, Financial reports have been prepared in accordance with International financial reporting standards.
In today's call, we'll discuss the non-ifrs financial measures which are reconciled to IFRS measures in our earnings release available on our website copaair.com.
Believe, expectations and or intentions regarding future events and results.
These forward-looking statements involve risk and uncertainty that could cause actual results results to the fur materially and are based on assumptions subject to change. Many of these are discussed in our annual report file with the SEC.
With that, I'll turn the call over to our CEO. Mr. Bond.
Thank you, Danielle. Good morning, everyone and thank you for joining us.
I'd like to begin by recognizing the outstanding efforts of our entire team.
Their dedication and professionalism continue to be key behind this. Popa success and our ability to deliver strong results. A quarter after quarter.
We're pleased to report another strong quarter with a 21% operating margin.
And a 17.7%. Net margin. Both among the best in the industry.
This results underscore the strength and resilience of our business model.
Which combined with copas discipline execution and cost leadership enable us to consistently deliver industry-leading margins and solid Financial results.
No, I'll go over the key highlights for the quarter.
Capacity increased by 5.8% year-over-year.
Percent increase of 0.5 percentage points compared to Q2 2024.
Passenger yields came in 4.1% lower year-over-year.
Or rasim declined 2.8% to 10.7 cents.
Unit cost or Caston. Decreased 4.6% to 8.5 cents. Well, cast on excluding fuel increased 3.2% to 5.8 cents.
Operationally copper is once again, delivered a world-leading, on-time performance of 91.5% and a flight completion factor of 99.8%.
furthermore, kopa was recently recognized by Sky tracks for the 10th consecutive year as the best airline in Central America, and the Caribbean and received the award for best airline staff in Central America, and the Caribbean
I would like to take this opportunity to congratulate our more than 8,500 dedicated co-workers.
Whose commitment to Excellence, enables us to consistently deliver a world-class travel experience to our passengers.
In terms of our Network.
We continue to expand our hope of the Americas in Panama with new service to San Diego, California and we restarted flights to karakas.
Further. We recently announced plans to start service at the end of the year to Locos Mexico and Puerto Plata Dominican Republic as well as restart flights to Santiago of Kalos. All in the Dominican Republic and Salvador Baya in Brazil.
Together with our earlier announcements of service to Salan to Kumon in Argentina. In September, this brings to 8, the total number of new and returning destinations announced so far this year further strengthening our position as the most complete and convenient connecting club for travel in the America.
Going forward, we continue to see a healthy demand environment and remain focused on our competitive advantages.
The best geographic position with our hope of the Americas in Panama.
Low unit cost and a strong balance sheet.
And a passenger-friendly product with the best on time performance.
This pillars continue to drive, our ability to consistently deliver industry-leading results with that. I'll turn the call over to Peter who will go over our financials in more detail.
Thank you, Pedro. Good morning, everyone and thank you for joining our call today.
I like to begin by echoing Pedro's appreciation for our teams continued, commitment to delivering, industry using results.
For the second quarter, we delivered a net profit of 149 million dollars for $3.61 per share.
At 25% year-over-year, increase in earnings per share.
Operating income reached, 177 million and an industry-leading, operating margin of 21%.
On the cost Side Custom decreased 4.6%, year-over-year to 8.5 cents.
Driven primarily by a 17% reduction, in the average, fuel price per gallon.
Km xq came in at 5.8 cents, which reflects an increase of 3.2% compared to the second quarter of 2024.
The performance is consistent with our target for the year.
This increase was mainly due to the non-current benefit recorded in the second quarter, 2024 in the maintenance materials and repair cost line associated with the return conditions of 9 aircraft lease extension.
This was partially offset by the decline in sales and distribution expense driven by the continued successful execution of our NDC strategy.
And a reduction in passenger, service and cost which reflects the year-over-year impact of the max 9 grounding in 2024.
On the balance sheet front. We ended the quarter with 1.4 billion dollars in cash. Short-term and long-term Investments representing 39% of the last 12 month Revenue.
This figure excludes over 600 million dollars in pre-delivery, deposits for future aircraft.
Additionally we currently have 42 unencumbered aircraft accounting for more than a third of our Fleet.
Further reinforcing our financial flexibility.
Total debt stood at 2.1 billion dollars entirely related to aircraft Finance.
For our Justice, net debt to a Visa Direction. Remain at under 3 leading, 0.6 times, and our average cost of debt continues to be highly competitive at 3.5%.
With regards to the return of value to our shareholders and pleased to announce that the company will make its third dividend, payment of the year of 1.61 cents per share on September 15th to all shareholders of record as of August 29th.
Regarding our fleet during the quarter, we took delivery of 3 Boeing 737 Max 8 aircraft, bringing our total to 3,215 aircraft.
we remain on track to end 2025 with a fleet of 125 aircraft and I'm pleased to share that we have secured financing for all of our 2025 deliveries
As for our 2025 Outlook, we are reaffirming.
Our full year operating margin guidance of 21% to 23% is supported by a healthy demand environment and continued cost discipline.
We also maintain our expectation for capacity growth in ASM in the range of 7 to 8% year-over-year.
Is based on the following assumptions.
Low factor of approximately 87%.
Rather than of approximately 11.2 cents.
X, your cousin of approximately 5.8 cents and an all-in fuel price of $2.45 per gallon.
To finalize. We remain confident that our proven business. Model robust, balance sheet and discipline execution, give us a solid foundation to continue delivering, consistent growth, strong, financial results, and industry-leading margins.
Thank you and we'll now open the call for questions from the analyst.
Thank you. And at this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1 1 1 on your telephone and wait for your name, to be announced to withdraw your question. Please, press star, 1 1 1. Again please, stand by while we compile the roster.
Our first question comes from Savvy silk from Raymond James.
Go ahead Savvy. Hey, good morning.
Good morning everyone. Um, I know Pedro.
Hey, Pedro. I I know you mentioned healthy, demand environment, but I was wondering if you could talk a little bit about you know what you're seeing in some of your biggest point of sale markets and if there's any you know, demand trends that stand out good or bad in any of the kind of particular markets or even passenger segments.
All of us of course is growing in the in the high single digit but we're we're still keeping up with low factors and again as mentioned uh increasing our guidance there, and that applies to most all of the markets we're serving.
Got it uh, that's helpful. And and and I don't know if this is for Peter, if you could drive it curious, you know, if you could share what you're seeing from bowing, it seems like the aircraft are coming on time or early and and just any early thoughts into kind of 2026 capacity
So so far our deliveries here have been early. Everything Has Come A week or 2 before what was projected or scheduled. Of course, everything is delayed. If we go back to the original to the original date but they're delivering on time this year and next year and and we received as Peter mentioned, 3 3 aircraft so far. So the other 10 are going to come in the last 5 months of the year. And next year, we have 6 deliveries, which will happen earlier. Most are in the first half of the year. So we should expect that the, the bulk of the ASM that we're going to have this year, are going to have a full year, a greater full year and impact in 2026, plus the 6 additional planes next year. So capacity, we're not guiding for 2026 yet.
But it would be trending a little bit higher than this year.
That's helpful.
All right, thank you. Our next question, comes to the line of, uh, Dwayne pfennigwerth from evercore. ISS is
Hey, good morning.
um, maybe you could just remind us, um,
On FX, what the impacts are.
Uh, from a top line perspective from a yield perspective and from a Chasm perspective, um, when we get you know, slightly weaker dollar, maybe you could just remind us of that. And and any Trends to call out uh, in local currencies that you're seeing,
Yeah. So, most of the major currencies in South America and in Latin America, including Mexico too, are up year-over-year and also up in the last six months. And since the last quarter,
You could call it weakness of the US dollar or or it doesn't really matter a much. Most of our sales are south to North originating in the South. So so we tend to benefit when when the currencies in Latin America are stronger, like like the case now but it's not it's not a significant difference year over year. I mean there's slightly up so it's good that's positive but but I wouldn't say that it's significant enough to to make a huge difference.
And I would add on the cost side, a most of our cost on US dollar based, we have a our base, our main cost based in Panama, where we have, you know, Fuel and our salaries, and US dollar based or most of our salaries, in your solar base, so that that will necessarily affect us on the on the FX side.
And cost.
Got it. And then, just for my follow-up, it's been a while since we've talked about it. But, um, maybe just an update on airport capacity at PTY. Any infrastructure projects that may be, um, you know, going on? And, you know, is there sufficient runway to support your growth plans, you know, 2026, 2027, and beyond? What's the next kind of marker we should be looking at there? Thank you.
Yeah, definitely. The the airport actually. It's it's uh, right now working on the on an expansion plan which includes work on on both runways, uh repair work but 1 Runway will be extended 03 left. It also includes Improvement to the taxi ways and between 10 and 12 additional gates to the new T2. This should all happen in the next 3 to 4 years. There's already there's already a a let's say a
And civil aviation. So we see this moving ahead and it's going to give the airport. I think a lot of another 10 years, at least of Runway.
Okay, thank you. Congrats on the strong results.
Our next question comes from Gilliam.
Mendes from JP Morgan. Your line is open.
Hey, everybody. Pedro Peter, Daniel. Thanks for taking my question. Uh, the first 1 is looking 2026. So it was assumed that the industry continues to grow, let's say buy meat to high single digits, uh, into next year. Is it fair to assume that yields can remain pretty much where they are right now?
And the second point to Peter, it's on the BuyBacks. If you can update us on how much you have executed in the second quarter of the year and how much is left out of the 200 million. Thank you.
Yeah, so so I'll take your first your first question so far, the man has been holding up.
And even though capacity has grown quite a bit in the last, in the last few years, but I should also mention that that our yields and rasim has come down, it was long, it's been lower than 254 and if it was lower than 24, then in 23.
So we've seen yields come down at the man, has grown in a in a region. But at the same time, we have lowered our unit cost and made up for most of that. So so we've been preparing for, for a long time, since 10 years ago and and also and specially after the pandemic to deliver strong results in a lower yield environment and we that's why we've been so focused on on efficiencies and cost. We have accomplished many of our goals and and we're not stopping there. So we're confident that that we can be successful. Even on, let's say flat yields like we're seeing right now or or even lower yields.
Hello, this is Peter here in Swan the BuyBacks as you stated the board has approved a hundred million dollar program and we have executed a to date around half of that program including around 10 million dollars that we have executed here today.
Okay, very clear. Thank you both
Thank you.
Our next question comes, from comes from Jens Slash from Morgan Stanley.
Hello. Um, thank you for taking my questions and congrats on on the solid results. I, I just want to ask, um, on on your cargo business, uh, which doing continuing to do quite well. Um,
how do you see things going forward? Do you see any like, slow down in volumes due to like the higher like tariffs and general like tensions, uh, across the region or um, or in reality. Do do you have visibility, um, into that business? Or is it very limited? Um, like how much in advance um, basically you you have as well, thank you.
Yeah, well, a few, a few things. Um, yeah, we will. Yeah, we do not have disability in in, in, in the long term, is is pretty much short term and but I would also mention yes. Cargo has been very strong in Q2 and the first half of the year. Most of our cargo moves in the belly of our passenger aircraft. So let's call it a slow risk. Cargo is not a bad, we're making a a very low risk and it's making the best of of all of our capacity. We also operate 1 cargo aircraft, which is done very, very well.
A 727-800 freighter. So we're bringing a second one this month; by the end of this month, we'll have a second 737-800 freighter. This one will be leased and operating lease, so that will also contribute to more cargo volume. But again, it will still be mostly moved in the belly of our passenger aircraft.
Okay, perfect. And just assuming that demand remains healthy. How much should we expect in terms of an increase in in in cargo? Um, with a new freighter?
Thank you.
The change will not be significant, it's it's a bump up, but but it will not. It should not move the needle in a significant way.
Got it. All right. Thank you.
Thank you.
Our next question comes from Ruggiero, ariro from Bank of America.
Yeah. Hi guys. Uh, good morning. Congratulations on the results. I have a couple of questions here. Number one, on fuel prices, you guys are guiding—one of the samples for the guidance is $2.45 per gallon.
We estimate this implies a price around 4% higher than the current curve indicates.
Does that make sense is there yet to price? Assuming in the guidance somewhat conservative?
In other words, if the remains that it, as it is, could there be upside risks to the margin guidance? That's number 1 and number 2, uh, moving. Now to the second half of the Year, could you provide an early view on the expected trend on casm? EX fuel, looking ahead into 26 and you've, you've sold it. You've talked about it already about capacity and, and, and potential Rising many any relevant expected change in in margin levels. Or, uh, any Trend, you're seeing anything you could share with us, would be great.
Thank you.
Okay. Hello, Roger. This is Peter here. I would start saying that the Fuel Curve that we embedded in our guidance is something that we don't update every day. So when we did our, when we build our Guidance, the fuel was around the 245 that we embedded in our guidance today, it might be slightly lower, but we don't update all further every day and to to the best of our knowledge. That's the 1 we use to build our guidance on the Catholic fuels and cabins that we're seeing for the second half. I would say that we remain committed with the 580 for the full year, and we don't see any seasonality of the, on the casualties. It should be much, pretty much flatted across the the fourth quarter, the fourth, the fourth quarters. So we don't see a lot of seasonality and we still don't provide any guidance for The cadmaxx View on 2026, but I can tell you that we're working on a lot of initiatives to add.
That's part of our DNA to always be very cost driven and focus on our costs to make sure we maintain our absolute and our competitive advantage on an absolute terms and on a relative terms on having a a low kasm mix View. And on the Raven, I can actually tell you that we've been continuous seeing the similar Trend that started in the second half of last year.
And we expect our rather for the second half of this year, to be similar to the second half of last year. We, we see a the trend to maintain similar with some markets behaving, a little better. So, markets are lowers, but averaging around in the same neighborhood of second half last year, uh, and that will be flat year in year and in line with our guidance of 11.2.
Fair enough. Very clear. Thank you so much.
Our next question comes from Michael linenberg, from Deutsche Bank.
Oh yeah. Hey, um, good morning everyone. And yeah, nice job. This quarter. Um I want to go back to savvy's question just about you know, demand strength and weakness across regions. You know, we heard 1 of your competitors, talk about Central America to the us being pretty weak. And I know it's not a market.
that you've historically been all that big in, but when I think about all the routes
You know, all the US destinations you're adding the Panama. I'm sure. Um the utility of Central American care uh passengers um of that Hub is is going up. Um but also domestic Columbia because it looks like that. The domestic Columbia Market is is doing much better now. So sort of how that, you know features into wingo's results. So Pedro, if you could go into a little bit more detail or color on that, that would be great.
Yeah, so hi Mike.
Central America is 1 of our weaker markets right now. I would, I would validate that, but again, not the most important market for us in that sense, especially at flow, we're very strong central America, to South America, and we're very strong central America to the Caribbean. But to the US, that's not our our number 1 strength. And yeah, domestic Columbia is doing well, and, and that has favored Wingo, No Doubt.
Great. And then just my second question, Pedro, when I think about your positioning where you fly there's not a lot of premium product offering, you know, there may be 1 or 2 other carriers. I mean you sort of stand Head and Shoulders above your most of your competition.
And to sort of borrow, you know, from Delta, they look at Premium Plus ancillary and they view that as their competitive moat. I think we're approaching 60% of their revenue falls into that premium ancillary bucket. You know, as you build out cargo and you have...
A very meaningful premium product you have lie flat on your max, 9's where, where is the premium ancillary percentage today even in rough numbers and and where was that, you know, maybe 5 years ago, and aspirationally where do you think you can take that? Because I truly believe that, you know, when we think about competitive modes, economic modes, that that premium plus ancillary is is something where you can shine. Thanks for taking my question.
Yeah, thank you Mike. You're totally right. We have we have a a premium product advantage in our Network definitely and I'm talking mostly of this intra Regional intra Latin America. Narrow body Network where we compete and where we have a leadership position. We now have also a premium product Advantage which we're learning to monetize. I mean, it's it's it's it's we're doing much better in ancillary revenues in premium ancillary revenues like upgrade. For example, our frequent flyer program uh seats premium economy, which we also have a nice premium economy across our Fleet. And so, every year we're doing better on the previous year, we don't share share specific but this year we're doing quite well and we see a lot of upside exactly in what you're saying for the reasons. You're mentioning
Great. Thanks for taking my questions.
Our next question comes from Alberto, Valero from UBS.
Like, uh, morning, afternoon, or Peter did. Thank you for taking my questions. How are you? If you can talk a little bit about competition, you mentioned that some test methods and others are a little bit better. Last time we spoke, we were talking about Argentina, maybe some new roads.
Brazil. Now we shall do it in chapter 11 uh, Latin with a moderate growth. Uh, if you could talk a little bit about competition and the last 1 about Volaris the partnership, the culture Fallout is if you can provide some update, how have been doing? Thank you very much.
Okay, thank you Alberto. So so I won't mention other lines. We don't even free advertising for sure. Uh, but there has been a lot of capacity in our region new capacity in the last 2 years, especially in the last 2 years and including including 2025. As I mentioned in the second half of the Year industry capacity is going to be up by about 9%. That includes kopa some Airlines which I won't mention have grown quite a bit 1. In particular has grown a lot in in our kind of markets and and the intra Latin America region and and you know, we've dealt with that successfully. We our our Lord factors are up and even though yields are slightly down as we have shared throughout the presentation, and in the earnings relief, we have also lowered our unit cost, of course,
Is a good guy from fuel this year also. So, so we we have a very well focused business model with the strongest product and better cost. So so we're in an excellent position to continue competing successfully.
In Mexico, we now work with Volaris. It's a culture that will continue to be developed and expanded, and we hope it's going to be very beneficial for both airlines. In our case, we're tying that significant Mexican market into our network and then giving Volaris Mexico feed from our very strong South American, Central American, and Caribbean network.
Thank you very much.
Thank you.
All right, final question comes from Tom. Fitzgerald from TD Cohen.
For the time um just kind of going back to Mike's question, how do you um view the role of Technology um or the role that technology can play in your um uh Revenue journey? And like whether like um, Dynamic pricing or uh, better, better data analysis, appreciate any color there.
yeah, so so a few things there, we
Since the pandemic.
We have invested quite a bit in digital technology. A lot of it actually homemade which also not only gives us the right digital Technologies, we need, but also a much better cost, not on a per passenger per booking basis. Like our internet booking engine, which now is where most of our sales come through, is is Copa owned homemade our app, which is right now, in some International contest competing as 1 of the 5 top apps in the world going against really, really topper links for the number 1 place. That's also homemade and that's allowing us to to better develop our anti revenues. Now, in terms of, let's say more sophisticated technologies that will allow for dynamic pricing, we work with third-party providers.
We work with some of the best third-party providers and I would say that we're in the in our infancy in terms of dynamic pricing and everything AI, it's going to it's going to provide uh for pricing in the future and revenue management. So so we're not super developed there but we're going that way. Always in a very
Cost conscious Roi Focus way, which is the copper weigh.
Appreciate that Pedro. That's really helpful caller. And then, um, just as a follow up, would you mind reminding us? Um, where you are in your seat identification, Journey, thanks again for the time and congrats on the nice results.
Yeah, thank you. Yeah, we we are not as advanced as we should have been right now and that's because of the delivery delays which have made us possible a little bit but we have I think
a year ago, out of our out of our
Full Fleet of 115 or so aircraft. We have 30 aircraft pending to take to 166 ft. So we have 30 aircraft pending in our densification project and I should highlight that, that our densification project is not sacrificing.
Any of the comfort product advantages. We have, we're maintaining a full, a comfortable, real real business class, with real business, class seats of 16, passengers. We're maintaining our 4 rows of premium economy with 34 pitch and, and then the rest of the cabin with very comfortable seats, recline headrest, the whole thing. So, we're not sacrificing that
I am showing no further questions at this time. I would now like to turn it back to Pedro Heilbron for closing remarks.
Okay, thank you. Thank you, operator. And thank you James. Thank you all for your questions. And for participating in this call we appreciate your continued interest and and support as always and hopefully very soon we're going to be confirming an investor Day date. It's going to be early hopefully very early December in New York city. So stay tuned and have a great day.
Reference, this does conclude the program, you may now disconnect.