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Copa Holdings Continues on Growth Track in Latin America

By Travis Hoium - Feb 22, 2018 at 3:48PM

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A growing fleet contributed to the airline operator's strong improvement on the top and bottom lines.

Copa Holdings (CPA -0.45%) continued its strong operating momentum in the fourth quarter of 2017 on the back of a growing fleet of aircraft. The number of flights, passengers, and miles flown were up, and the cost to fly was down, driving solid profitability. 

Here's a look at the quarter and what operating metrics looked like to end 2017. 

Airplane flying above the clouds with a starry sky behind it

Image source: Getty Images.

Copa Holdings: The raw numbers

Metric Q4 2017 Q4 2016 Year-Over-Year Change
Sales $675.6 million $601.3 million  12.4% 
Net income $100.8 million  $90.5 million  11.4% 
Diluted earnings per share $2.38  $2.14  11.3% 

Data source: Copa Holdings Q4 2017 earnings release. 

What happened with Copa Holdings this quarter? 

Stronger results were driven by a growing fleet, which allows for more available revenue miles. But costs were also down after management adjusted how long the company would depreciate aircraft. Here are the operating highlights to understand for the quarter:

  • Revenue passengers carried jumped 11.9% versus a year ago to 2.46 million, driving most of the growth you see above. Available seat miles were up 9.2% to 6.11 billion miles. 
  • Load factor improved 160 basis points to 83.2%, which helped drive margins higher. Revenue per average seat mile increased 2.9% to 11.1 cents and costs per average seat mile were down 4.2% to 9.1 cents. 
  • Fuel was a bit of a headwind, with the average price per gallon of fuel up 3.5% to $2.03 and overall fuel consumption up 8.8% to 78.7 million gallons. 
  • Operating income was up 70.4% to $120.4 million in the quarter, driven by the margin expansion explained above. 
  • Depreciation and amortization costs were down 22.7% as management stretched out the expected life of aircraft. The slower depreciation will drive higher margins over the course of an aircraft's life. 
  • In January, Copa took delivery of a 737-800 aircraft, increasing the fleet size to 101. 
  • A dividend of $0.87 per share was declared and is payable March 15, 2018, to shareholders of record as of March 5, 2018. 

What management had to say

There isn't a lot differentiating airlines, but Copa Holdings has distinguished itself as one of the best operators in the world. Here's what management said in the earnings press release: "[I]n January 2018, the company was recognized by FlightStats -- for the fifth consecutive year -- as the most on-time airline in Latin America, and by OAG as the 4th most on-time airline in the world."

Strong operations combined with booming demand drives net income growth, which is what we're seeing in Copa Holdings today. 

Looking forward

Operations have been improving for Copa Holdings for a couple of years now, and there's no reason to think that won't continue. Pricing is strong, costs are under control, and even small fuel headwinds aren't offsetting improvements in other parts of the operation. As one of the best airline operators in the world, Copa Holdings seems well positioned for long-term, profitable growth. 

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Copa Holdings, S.A. Stock Quote
Copa Holdings, S.A.
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