What happened

Shares of Copa Holdings (NYSE:CPA) climbed 19.6% on Thursday after the Panamanian airline reported better-than-expected earnings that suggest its home Latin American markets are holding up well.

So what

Late Wednesday, Copa reported first-quarter earnings of $2.11 per share on revenue of $672 million, easily topping analyst expectations for $1.54 per share in earnings on sales of $660 million. Consolidated passenger traffic grew 2.3% in the quarter, while capacity grew by only 1.9%, resulting in the airline raising its load factor by 40 basis points, to 83.3%.

Airplanes on the ground at a busy airport with one flying overhead.

Image source: Getty Images.

On a year-over-year basis, revenue fell by 6% and operating profit was down 23.6%, but investors were bracing for declines due to South American currency weakness and uncertainty about local economies. Copa's results gave investors reason to hope that things aren't going as bad as had been feared, causing a relief rally in the shares.

Copa also said it expects to resume operating its six Boeing 737 MAX jets in July. The company did not take delivery on two additional 737s that had been scheduled to arrive in March, due to the worldwide grounding of the MAX fleet, though a number of operators are hoping to resume service in July.

Now what

Copa management is standing by its forecast for 12% to 14% operating margins for the full year, despite higher fuel costs and disruptions due to the 737 MAX grounding. That's a clear indication they are not worried about demand, which is good news for those concerned about Latin American economies.

Even after Thursday's gains, the airline is still down 16% over the past year. Given how well it managed to perform through difficult headwinds in the first quarter, Copa has plenty of potential to climb higher, assuming its core markets can hold up.