Copa Crushes it in Latin America
Demand is slowing elsewhere, but Copa reported robust sales on its earnings call. However, the airline is concerned by rising fuel prices. Also: Did Southwest copy the Big 3 on a customer enhancement?
If you’ve been reading me for a while, you know I love airlines that adopt a low cost strategy and stick to it. Few carriers do this better than Panama's Copa, with its all-Boeing 737 fleet and simple, standardized product.1 If the airline can't reach a destination with a Max, it doesn't fly there — no matter how enticing the revenue potential.
Yet again, Copa’s approach paid off in the second quarter, with the company reporting a 24.1 percent operating margin. Unlike other lower-cost airlines in North America and Europe, Copa reported no slowdown in demand compared to last year, with yield up 2 percent and passenger revenue per available seat mile increasing 3.6 percent. The rest of the year should produce similar results: Copa guided to a full-year operating margin of 22 to 24 percent. A strong outcome for an airline growing capacity by 12 to 14 percent year-over-year.
Since it is such a well run airline, Copa had an advantage over other airlines in the region during the early pandemic recovery. It nimbly restored capacity when others couldn't. Now, the competition is back to normal, Copa CEO Pedro Heilbron said, but demand remains so strong that even this extra capacity is being absorbed by consumers. "We continue to see strong demand in the region," he said. Three times in a 45-minute call, executives referred to the environment as "robust."
On the call, executives shared details about the demand environment, including commentary on return of business travel, and a discussion of how currency fluctuation affects demand. They also shared some less promising news on rising oil prices, and the company’s subsidiary in Colombia.
Paid subscribers should read on for the details, plus some commentary about a new Southwest policy that copies American, Delta and United.