Copa Airlines It expects the strong travel demand and gains it saw last year to continue through 2024, even as its growth takes a hit from the grounding of the Boeing 737 Max 9.
“[We] We continue to see a healthy demand environment in the region and we expect to once again deliver strong operating margins in 2024,” Copa Holdings chief executive Pedro Heilbron said during the airline’s fourth-quarter earnings call on 8 short.
The group anticipates an operating margin of 21-23% this year.
Copa earned an operating profit of $219 million in the fourth quarter, with an operating margin of 24%. Its operating income for the fourth quarter rose 3% year-over-year to $917 million, while operating expenses rose 4% year-over-year to $698 million in the period.
Copa’s fourth-quarter cost increase was partially offset by lower fuel and distribution expenses, the latter thanks to increased direct-to-consumer sales. The carrier posted a fourth-quarter net profit of $192 million.
Copa’s operating income for 2023 rose 17% year-over-year to $3.5 billion, while its costs rose 5.4% year-over-year to $2.6 billion.
“2023 was a very strong year for Copa,” says Heilbron.
While its financial outlook for 2024 remains positive, Copa has curbed its expected capacity growth following the grounding of the 737 Max 9 in January. It predicts its available seat miles (ASM) will grow only about 10% this year, down from a previously forecast 12-14% increase.
The piece expects to be “completely and are fairly compensated” from Boeing for the grounding, says Chief Financial Officer Jose Montero.
Demand for corporate travel remains depressed from pre-pandemic levels, but travelers visiting friends and relatives, and leisure traffic, are exceeding the pre-Covid-19 standard.
The impact of the unrest in Ecuador on the Copa’s outlook is “not significant”, Heilbron adds.
Slower growth isn’t stopping Copa from expanding its footprint and strategic Panama City hub. It plans to add Florianopolis in Brazil, Raleigh-Durham in North Carolina and Tulum in Mexico to its network this summer. Heilbron describes Raleigh-Durham, which serves North Carolina’s capital, as a fast-growing Southeastern U.S. city that Copa “doesn’t really serve well today.”
Copa stands to be the only Latin American airline to fly to Raleigh-Durham when its flights begin in June. Aeromexico will join her less than a month later with his nonstop in Mexico City. Lufthansa also plans to add service to the airport this summer.
Raleigh-Durham is a city focused on Delta Air Lineswhich is a partner of Aeromexico.
Copa’s expansion plans come after it increased its capacity, measured in available seat kilometers (ASM), by 13.4% last year. This included adding Austin, Baltimore-Washington, Barquisimeto in Venezuela and Manta in Ecuador to its map. Its low-cost subsidiary Wingo also added several new domestic routes to Colombia and Panama.
Heilbron describes Panama City as “the most complete and convenient hub in Latin America.”
SLOWER FLEET GROWTH
Copa has cut four 737 Max from its 2024 fleet plan as a result of the Max 9 being grounded, Montero says. It expects further delays in the delivery of the 11 aircraft expected this year. The carrier’s fleet plan for 2024 now includes its first eight Max 8s, as well as three Max 9s.
“It’s going to be a tough year in terms of additional capacity or aircraft availability,” Heilbron says.
Boeing 737 production rates have been limited to 38 per month as the US Federal Aviation Administration audits its production processes on the Max line.
Copa has Japanese-operating-lease-with-call-option financing for eight of the 11 planned Max deliveries this year, Montero says. The structure allows an airline to finance the full capital cost of the aircraft.