- Robust Margins: Operating margin of 21% and net margin of 17.7%, driven by 4.6% decline in unit costs (CASM) to $0.085.
- Revenue Dynamics: Passenger yields fell 4.1%, and unit revenues (RASM) dropped 2.8% to $0.107 amid 5.8% capacity growth and 87.3% load factor.
- Profit Growth: Net profit surged to $149 million ($3.61 EPS), a 25% YoY increase, with operating income hitting $177 million.
- Fleet Expansion: Delivered 3 Boeing 737 MAX-8s, expanding fleet to 115 aircraft, on track to reach 125 by 2025 with secured financing.
Strong Balance Sheet and Guidance
The company's balance sheet remains strong, with $1.4 billion in cash, short-term and long-term investments, and a debt-to-EBITDA ratio of 0.6x. Copa's outlook for 2025 remains unchanged, with an operating margin guidance of 21% to 23%, supported by a healthy demand environment and continued cost discipline. The company expects capacity growth in ASMs in the range of 7% to 8% year-over-year.
Fleet and Airport Capacity Expansion
Copa took delivery of 3 Boeing 737 MAX-8 aircraft during the quarter, bringing its total fleet to 115 aircraft. The company remains on track to end 2025 with a fleet of 125 aircraft and has secured financing for all 2025 deliveries. Regarding airport capacity at PTY, Copa mentioned that the airport is working on an expansion plan, which includes work on both runways, repair work, and the addition of 10 to 12 new gates to the new T2, expected to be completed in the next 3 to 4 years.
Buybacks and Cargo Operations
Copa has executed around half of its $200 million buyback program, including around $10 million executed year-to-date. On cargo, Copa mentioned that it does not have long-term visibility, but demand has been strong in Q2 and the first half of the year. The company operates one cargo aircraft and will bring a second 737-800 freighter this month, which will contribute to more cargo volume.
Valuation and Upside Risks
With a P/E Ratio of 7.98, P/B Ratio of 1.96, and EV/EBITDA of 6.98, Copa's valuation appears reasonable. The company's CFO mentioned that the fuel curve embedded in the company's guidance is not updated daily, and the fuel price assumption is somewhat conservative, suggesting potential upside risks to the margin guidance if fuel prices remain stable.
Management Insights
Pedro Heilbron, Copa's CEO, stated that demand is strong, but Central America to the US is a weaker market due to capacity increases and visa issues. He also emphasized Copa's investments in digital technology, including a homemade internet booking engine and app, which have improved ancillary revenues. Heilbron mentioned that the company is dealing successfully with competition, maintaining load factors and lowering unit costs.