Earnings Call Transcript - CPA Q1 2026

Operator, Operator

Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings First Quarter Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a Q&A session. At that time, if you have a question, you will have to press star-1-1 on your telephone. As a reminder, this call is being webcast and recorded on May 14, 2026. Now I will turn the conference over to Daniel Tapia, Director of Investor Relations. Sir, you may begin.

Daniel Tapia, Director of Investor Relations

Thank you, Carmen, and welcome everyone to our first quarter earnings call. Joining me today are Mr. Pedro Heilbron, Executive Chairman and CEO of Copa Holdings, and Peter Donkersloot Ponce, our CFO. First, Pedro will begin by going through our first quarter highlights, followed by Peter, who will discuss our financial results in more detail. Immediately after, we will open the call for questions from analysts. A reminder: Copa Holdings' financial reports have been prepared in accordance with International Financial Reporting Standards. In today's call, we will discuss certain non-IFRS financial measures. A reconciliation of these measures to comparable IFRS measures can be found in our earnings release, which is available on our website. Our discussion today will also contain forward-looking statements, not limited to historical facts, that reflect the company's current beliefs, expectations, and our intentions regarding future events and results. These forward-looking statements involve risks and uncertainties that could cause results to differ materially and are based on assumptions subject to change. Many of these are discussed in our annual report filed with the SEC. Now I would like to turn the call over to our Chairman and CEO, Mr. Pedro Heilbron.

Pedro Heilbron, Executive Chairman & CEO

Thank you, Daniel. Good morning, and thank you all for joining us for our first quarter earnings call. Before we begin, I would like to recognize our more than 9,000 coworkers. Their commitment and professionalism continue to be key drivers of Copa's strong operational performance and leadership in our industry. Especially in today's higher and volatile jet fuel price environment, their consistent focus on execution and cost discipline has allowed us to enter the current fuel environment from a position of strength. To them, as always, my sincere appreciation and respect. We delivered another quarter of strong financial and operational results, reaffirming the strength and resilience of our business model and our ability to consistently deliver industry-leading profitability. Our first quarter results reflect a strong demand environment across the region, continued discipline in cost execution, and our relentless focus on delivering operational excellence for our passengers. Now I will go over our first quarter highlights. Capacity increased 14% year over year, while passenger traffic increased 15%, resulting in a 0.8 percentage point increase in load factor to 87.2%. Passenger yield increased 1.6% year over year. RASM came in at $0.118, 2.7% higher compared to Q1 2025. Unit cost per CASM increased 1.6% to $0.089, driven by higher fuel prices. CASM excluding fuel declined 1% to $0.058, reflecting our continued cost discipline. And we delivered an industry-leading operating margin of 24.6%, 0.8 percentage points higher than Q1 of last year. On the operational side, we delivered an on-time performance for the quarter of 91.6%, and a flight completion factor of 99.7%, once again positioning Copa among the very best in the industry. Turning to our network: we have resumed service to Valencia and Barquisimeto and have scheduled a restart of Barcelona in June. Together with our existing service to Maracaibo and Caracas, this returns us to serving five cities in Venezuela from our Hub of the Americas in Panama. With these additions, we will operate to 87 destinations in 32 countries, further strengthening our position as the most complete and convenient connecting hub for travel in the Americas. With regard to our fleet, during the quarter we took delivery of two Boeing 737 MAX 8 aircraft, ending Q1 with 127 aircraft. We have already received two additional MAX 8s in the second quarter, bringing our fleet total to 129 aircraft. Additionally, in April we announced a new Boeing 737 MAX order for 40 firm aircraft and 20 options, with delivery schedules between 2030 and 2034. This new order, which begins as we complete deliveries from our existing order book in 2029, reinforces our long-term growth strategy and ensures Copa's Hub of the Americas continues to lead well into the next decade. As always, we maintain significant flexibility in our fleet plan thanks to options, flight rights, lease expirations, and unencumbered aircraft, which provide us the ability to adjust our growth plan if needed. Turning now to the current environment of higher and volatile jet fuel prices: throughout our history we have navigated periods of increased fuel prices and volatility, consistently delivering strong financial results supported by the effectiveness of our business model, low cost, and disciplined execution. I feel confident that we will demonstrate this once again. To summarize, we delivered strong, industry-leading profitability in the quarter. We continued to improve our already competitive cost structure. We keep delivering best-in-class on-time performance and reliability. We continue expanding and strengthening our network as the most convenient hub for intra-America travel. The current demand environment remains strong, supporting yield increases. And our proven business model built on having the best geographic position, structurally low unit cost, a strong balance sheet and liquidity position, and a superior passenger-friendly product positions us well to navigate the higher jet fuel price environment and, again, in 2026 deliver strong and industry-leading financial results. With that, I will turn the call over to Peter, who will walk us through the financials in more detail.

Peter Donkersloot Ponce, Chief Financial Officer

Thank you, Pedro. Morning, everyone, and thank you for joining our call today. I would like to start by reinforcing Pedro's recognition of our team's continued dedication to delivering industry-leading results. Their commitment remains essential to our strong operational and financial performance. Let me begin by going over our first quarter highlights. We reported a record net profit of $212 million, or $5.16 per share, representing a 20.5% year-over-year increase in earnings per share. Net margin came in at 20.2%, 0.5 percentage points higher year over year. Operating profit came in at $258 million, resulting in an operating margin of 24.6%, 0.8 percentage points higher than the first quarter of 2025. Unit cost excluding fuel, or ex-fuel CASM, declined 1% to $0.058, reflecting the company's continued focus on cost discipline. Including fuel, CASM increased 1.6% year over year to $0.089, driven by the increase in the average price of jet fuel. During the quarter, all-in jet fuel prices increased 7.5% year-over-year, from $2.54 to $2.73 per gallon. While the average increase for the quarter was moderate, higher prices in March had a more pronounced impact on our results, driving approximately a $20 million year-over-year impact on first quarter performance. Moving on to our balance sheet and liquidity: we ended the quarter with approximately $1.5 billion in cash, short-term and long-term investments, representing 40% of last 12 months' revenues. This number excludes approximately $700 million in pre-delivery deposits for new aircraft, as well as 45 unencumbered aircraft and 15 unencumbered spare engines, worth an estimated additional value of over $1 billion. Total debt, including lease liabilities, stood at $2.4 billion, and we ended the quarter with an adjusted net debt to EBITDA ratio of 0.7x, reflecting our strong financial position. I would like to highlight that the average cost of debt, comprised solely of aircraft-related financing, remains highly competitive at 3.6%. Turning now to the return of value to our shareholders: the Board of Directors has ratified the company's second quarterly dividend for the year of $1.71 per share to be paid in June 2026 to all shareholders of record as of May 29, 2026. Additionally, during the quarter we repurchased $45 million worth of shares, representing approximately 1% of the total outstanding shares. Finally, turning to our outlook: we continue to see a robust demand environment across the region. Our effective business model, combined with continued cost discipline, positions us to continue sustaining strong financial performance. For the second quarter, we expect to deliver an operating margin in the range of 8% to 12%, with capacity growth in ASMs of approximately 16% year-over-year. These results are impacted by a projected year-over-year increase in the all-in jet fuel price per gallon in the range of 80% to 90%, for which we expect to recover approximately 50% via higher revenues. This partial pass-through is a result of the already advanced booking levels. For the full year, we continue to expect our capacity growth within the range of 11% to 13%, a load factor of approximately 87%, and unit cost excluding fuel of approximately $0.057. Based on the current fuel curve and assuming recent yield improvements are sustained, we expect to recover a substantial portion of the increased fuel cost expense for the year, reaching up to 100% by the end of the year. We will review our full-year operating margin and RASM expectation as conditions stabilize and visibility for the second half of the year becomes clearer. In summary, despite the current fuel environment, we remain confident in our ability to deliver strong results supported by robust demand, disciplined cost management, and our proven and resilient business model. Thank you, and we will now open the call for questions from the analysts.

Operator, Operator

Thank you. Simply press 1-1 to get in the queue and wait for your name to be announced. To withdraw your question, press star-1. One moment for our first question. And it comes from Savi Syth with Raymond James. Please proceed.

Savi Syth, Analyst, Raymond James

Hey. Good morning, everyone. Your growing capacity is 16% into a seasonally weak quarter here in the second quarter, and the guidance seems to imply a high single-digit to low double-digit unit revenue. I was wondering if you could provide a little bit more color on kind of how much of the quarter was booked prior to the fare increases, and if there was any particular region that stands out as being stronger.

Pedro Heilbron, Executive Chairman & CEO

Hi, Savi. I would say that we see strength across the network and not necessarily one region stronger than others. I think we have not maybe seen this in a while: there is always weakness somewhere, but right now every region we serve is performing very well and is showing strength.

Savi Syth, Analyst, Raymond James

That is helpful. And maybe just following up on that, some of the local currencies are much stronger lately. I know you price your tickets in U.S. dollars, but just wondering what the purchasing power strength had as a tailwind in Q1 and what you are thinking it is in Q2?

Pedro Heilbron, Executive Chairman & CEO

Well, I think that will always play a positive role when currencies are stronger in Latin America. We have been asked that question before, and the answer has always been that we tend to benefit more from stronger Latin American currencies because we do generate a slightly higher percentage of our traffic southbound than in the other direction. If we look at the main currencies of Latin America compared to one year ago, most of the important ones, or the larger markets, are up double digits. So that, of course, plays a positive role in what we are seeing.

Savi Syth, Analyst, Raymond James

That is helpful. Thank you.

Operator, Operator

Thank you. Our next question comes from Duane Pfennigwerth with Evercore ISI. Please proceed.

Duane Pfennigwerth, Analyst, Evercore ISI

Duane Pfennigwerth from Evercore ISI. Hey. Good morning. Maybe just to continue right there. Can you quantify the FX tailwind sequentially? What you would consider that to be in the second quarter versus what you realized in the first quarter?

Pedro Heilbron, Executive Chairman & CEO

I am not sure if we can be very specific about that, but the currencies have remained strong. They have actually gained a little bit in the last month or two. Some are stable, others have gained a little. We are not seeing weakness in the currencies. So I think it is a good environment for what we are seeing overall in terms of demand, even demand being resilient over the yield increases that we have also seen from the whole industry in the last few months.

Duane Pfennigwerth, Analyst, Evercore ISI

Thanks. And then just for my follow-up, I think your CASM ex was down about 1% in the first quarter, and you are guiding to down 1% for the year. Is that the right way to think about the trend consistently across the quarters? Or do you see easier comps, for example, in Q2? Do you see an easier comp there? Or is it pretty much spread across the year? Thank you.

Peter Donkersloot Ponce, Chief Financial Officer

Hello, Duane. This is Peter, and thank you for the question. I would say that we are guiding for a full-year CASM ex fuel of $0.057, and we generally expect CASM to be relatively stable across the year. We always talk about CASM being fairly stable over roughly a year, so I think that is what we should be expecting for the year. That is backed by all the initiatives we have talked about, and it should be stable across the year.

Duane Pfennigwerth, Analyst, Evercore ISI

Thanks. So no quarter sticks out as a massively easier comp versus the others?

Peter Donkersloot Ponce, Chief Financial Officer

Nope. Not particularly.

Duane Pfennigwerth, Analyst, Evercore ISI

Thank you very much.

Operator, Operator

Thank you, Duane. Have a good day. Our next question comes from Julio Osorio with JPMorgan. Please proceed.

Julio Osorio, Analyst, JPMorgan

Yes. Hello, everyone. Good morning. Thanks for taking the time. I have a couple questions. The first one: can you provide more details on this demand environment? I understand that demand has been trending well, but is there a specific segment where it has been more sensitive to the higher tariffs? And the second one is a follow-up on the cost structure: you mentioned you are implementing several cost-cutting initiatives. Can you provide more details on how these initiatives are trending?

Pedro Heilbron, Executive Chairman & CEO

Thank you, Julio. I will start with the first question, then ask Peter to help me with the cost question. As I mentioned before, we are seeing strong demand across our network. All regions are carrying their own weight. The way we are reflecting this is that our April numbers show ASM growth around 16% and RPMs grew 16% as well. There have been yield adjustments done by the whole industry to compensate for fuel. So that combination of strong double-digit growth in spite of yield adjustments is, I think, a good testament to how strong demand is in our region right now.

Peter Donkersloot Ponce, Chief Financial Officer

Hello, Julio. This is Peter. I will talk about the cost structure. Mainly, what we are seeing that is driving cost down and some of the initiatives are the work we continue to execute. One is ASM growth backed by the capacity and the densification project that we have been talking about, and that helps us continue to dilute part of our fixed costs. About 30% of our ex-fuel expenses are not directly related to capacity, so we can make sure those grow less than ASMs and benefit from that growth. The other area is continued benefits from our sales and distribution strategy and other initiatives in that bucket. If I were to give color, those are the two main buckets I would call out in the cost structure going forward.

Julio Osorio, Analyst, JPMorgan

Got it. Super clear. Thank you.

Operator, Operator

Thank you. Our next question is from Michael Linenberg with Deutsche Bank. Please proceed.

Michael Linenberg, Analyst, Deutsche Bank

Yes. Hey, thanks for taking my questions. I saw that you did unveil your formalized 2027 fleet plan. We are obviously looking at very meaningful fleet growth this year and next year. Can you just remind us what the CapEx number is for this year? What is that number for next year since you are going to start incurring some of that CapEx this year as well?

Peter Donkersloot Ponce, Chief Financial Officer

For this year, our cash CapEx is in the neighborhood of $300 million, which will be mainly maintenance. Fleet-related CapEx would be in the range of $750 million to $800 million for the year. We do not guide multiyear CapEx spend in detail, but that gives you the neighborhood for the year and how the fleet CapEx relates to the fleet growth rate you are seeing for next year.

Michael Linenberg, Analyst, Deutsche Bank

Okay. Great.

Pedro Heilbron, Executive Chairman & CEO

Let me add something, Mike. Last year we took delivery of 13 aircraft. This year it is seven or eight aircraft we are taking delivery of, so slightly less than last year. Going forward we have a lot of flexibility — as we have done in the past we can adjust deliveries and adjust capacity. We are very comfortable that we can adjust to the business environment as needed. We never roll the dice without a parachute. Now I know those two things do not go together, but you know what I mean.

Michael Linenberg, Analyst, Deutsche Bank

Yes. I like the context because it seems like you have been at this level for the last couple of years. This is not really all that extraordinary. Now that you are getting everything, it is likely — my second question is, given the high fuel price environment and you are still able to put up double-digit operating margins even in what will be your seasonally weakest quarter, you have the potential to grow in this environment and I suspect many competitors cannot. From a competitive capacity perspective, what are you starting to see in the market as you push full steam ahead maintaining your full-year ASM growth? I suspect we will see others scale back. Any color on what you are seeing in the region? Obviously Spirit going away gives some benefit. Anything else?

Pedro Heilbron, Executive Chairman & CEO

Besides the obvious of Spirit going away, which you mentioned, we have not really seen any particular movement from the rest of the airlines serving the region. We have not seen any capacity pullback in response to the current fuel crisis. That is not to say it might not happen in the future, but we have not really seen anything up to now.

Michael Linenberg, Analyst, Deutsche Bank

Okay. Thank you.

Operator, Operator

One moment for our next question, please. It is from Alberto Valerio with UBS. Please proceed.

Alberto Valerio, Analyst, UBS

Hi, gentlemen. Thanks for taking my question. Congrats on the results. My question mainly on the crack spread: we noticed this product's crack spread is below historical levels. Can we consider this going forward or was it just for the quarter? Do we have any benefit in Panama? The second question: regarding the guidance for the year, can you consider it as a nominal pass-through on the fuel price, or can you reconsider it as recovering the margins of 2022–2023 for the full year? Thank you very much.

Peter Donkersloot Ponce, Chief Financial Officer

So I will take the first one. On the fuel and the crack spread, we are seeing similar trends as everybody else in the fuel environment. We do have a 15-day lag on how price changes pass through our fares, and that is one of the reasons our first quarter average was lower than the expectation. Going forward, we are using U.S. Gulf Coast jet fuel future curves, and that is what we are basing our guidance on, similar to others. In addition, we add our inland cost that should be in the neighborhood of $0.30 per gallon, and that is what gives us our guidance on fuel.

Pedro Heilbron, Executive Chairman & CEO

Regarding the rest of the year and recovery: there are still many unknowns and variables that come into play, starting with fuel, which is having the greatest impact right now. We do not really know in which direction fuel is going to go for the rest of the year. Our guidance follows the fuel curve and the yield increases that are already in place. For the second half of the year, bookings are much lower in the booking curve, which means the yield increases already in place will have a more significant impact in the second half than they were able to have in the second quarter. For the second quarter we were already booked around 40% when the current fuel spike hit us, so we could not do anything about that 40% for Q2. The second half has much lower booking levels relative to the time of the price changes, so the yield adjustments will have greater effect then. Our guidance is based on current yield adjustments that are already in place, the fuel curve, and the bookings that were already in place. Booking is not a variable that will retroactively change; bookings will yield at the new price depending on competition and demand. Right now demand looks very strong and competition is being rational. The fuel curve might be the variable nobody can truly predict.

Alberto Valerio, Analyst, UBS

Fantastic. Thank you very much.

Operator, Operator

Thank you. For our next question, we have Daniel McKenzie of Seaport Global. Please proceed.

Daniel McKenzie, Analyst, Seaport Global

Oh, hey. Good morning. Couple questions here. Going back to Mike's question, given the high-priced fuel environment, is it your sense that there could be some strategic opportunities that come from this if fuel prices continue to rise? Related to that, when thinking about the supply chain in Latin America, are there any refineries in some countries disproportionately reliant on particular sources that might be catching your radar?

Pedro Heilbron, Executive Chairman & CEO

From what we can see and from speaking to our fuel suppliers, we believe we are in a good position in terms of supply. Our jet fuel largely comes from regional sources—U.S., Mexico, Venezuela, Colombia, and other countries in the hemisphere—so supply availability regionally is in a good position. Fuel prices are international and regional supply does not change global crude prices like WTI or Brent, but in terms of having availability of jet fuel, we are in a good position, which in the current environment is actually great.

Daniel McKenzie, Analyst, Seaport Global

Yeah. And then this second question came directly from an investor and is something I wondered about in the past: have you ever looked at your RASM results in constant currency, and does that even make sense? Given how many countries you serve and how sensitive demand seems to be to foreign currencies, I am curious what that would look like on a constant currency basis.

Pedro Heilbron, Executive Chairman & CEO

I'm not sure I fully understood the phrasing of the question, because the reality is what we built with — we always price in dollars, as you know. Strong currencies tend to favor us, even though we also do well when currencies are not so strong. Currencies usually move in the same direction like they are doing now, but sometimes there are particular issues in specific countries that make them stand out in a different way. If you mean presenting RASM on a constant currency basis like some other industries, airlines typically do not report that conventionally, and it becomes complex because we price in dollars and traffic flows and capacity allocation also change with currencies. I appreciate the idea, but it's not the typical industry presentation.

Daniel McKenzie, Analyst, Seaport Global

Yeah. I get it. It's an odd question; other industries do that, but I appreciate the response. Thanks so much.

Operator, Operator

And our last question comes from Filipe Ferreira Nielsen with Citi. Please proceed.

Filipe Ferreira Nielsen, Analyst, Citi

Hey. Hi, everyone. Thanks for taking my question and congrats on the results. Just wondering about capacity allocation: how are you allocating this capacity between the multiple regions? Within the strong growth of capacity in the first half of the year and a little bit lower in the second half as per your guidance, are you seeing any shift from one region to another to accommodate for higher pricing? Related to that, how are your Venezuelan operations developing and is this having an important impact in this pricing environment?

Pedro Heilbron, Executive Chairman & CEO

Thank you, Filipe. A few things: if we look back a few years, we have been growing capacity much less than some competitors, mainly due to delivery timing; we would have liked to grow faster in 2024 and 2025 but did not have enough planes coming in. This year is different and we needed that capacity. We have many options for where to deploy aircraft, and given the current crisis we are shifting capacity a little bit toward more profitable opportunities. Our whole network is very profitable, but we are trying to allocate where it is needed most or where it can be more profitable, which helps compensate for higher fuel. Nothing is very significant because demand is strong across most of our network. Regarding Venezuela: we are the only international airline that never stopped flying to Venezuela except for a roughly ten-day window when security concerns made it unsafe to operate. We have maintained a constant presence in that market. By June we will be back to the same capacity we had a little over a year ago; we will serve five cities and over 40 weekly flights in Venezuela. In terms of impact on unit revenues or yields, nothing significant — Venezuela will be around the average.

Filipe Ferreira Nielsen, Analyst, Citi

This is all very clear. Thank you so much.

Operator, Operator

And this concludes our Q&A session for today. I will pass it back to Pedro Heilbron for his final comments.

Pedro Heilbron, Executive Chairman & CEO

Okay. Thank you all. This concludes our earnings call. Before we leave, I want to mention that Copa operates the strongest network: we have a strong and diversified set of cities and regions we serve, the lowest unit cost for a full-service airline, and a superior product to most of our narrow-body competitors. We feel we are in a really good position to deal with the current crisis and come out ahead as we have been able to do in the past. Thank you for your continued support. Thank you for participating in our call, and you have a great day.

Operator, Operator

Thank you. Ladies and gentlemen, thank you for participating. You may now disconnect.