Copa Holdings Reports Financial Results for the Third Quarter of 2020

Copa Holdings, S.A. (NYSE: CPA), yesterday announced financial results for the third quarter of 2020 (3Q20). The following financial information, unless otherwise indicated, is presented in accordance with International Financial Reporting Standards (IFRS). See the accompanying reconciliation of non-IFRS financial information to IFRS financial information included in the financial tables section of this earnings release. Unless otherwise stated, all comparisons with prior periods refer to the third quarter of 2019 (3Q19).

Due to government restrictions on air travel implemented in response to the Covid-19 outbreak, the Company did not provide scheduled commercial service during the first 45 days of the quarter.  On August 14, the Company restarted limited scheduled commercial operations subject to Panama’s restrictions on the number of flights and entry for non-citizens and non-residents, and it has been gradually increasing capacity ever since.  However, the capacity figures were still very low on a full quarter basis.  Therefore, this earnings release will focus on the financial results and metrics that are relevant in these circumstances and will omit certain financial ratios, unit metrics and operational indicators that are usually provided, since they are either not measurable or immaterial on such a limited operational base.

OPERATING AND FINANCIAL HIGHLIGHTS

  • Copa Holdings reported a net loss of US$118.1 million or US$2.78 per share. Excluding special items, the Company would have reported a net loss of US$121.6 million, or US$2.86 per share.
  • Special items for the quarter include a US$3.6 million unrealized gain on the mark-to-market of the Company’s outstanding convertible notes.
  • Copa Holdings reported an operating loss of US$107.0 million.
  • Cash consumption, defined as cash disbursements less proceeds, excluding extraordinary financing activities and asset sales, averaged US$36 million per month during the quarter.
  • The Company ended the quarter with US$1.3 billion of available liquidity, consisting of US$1.0 billion in cash, short-term and long-term investments, and committed and undrawn credit facilities of US$305 million.
  • The Company repaid US$50 million in short-term lines of credit, closing the quarter with a total debt of US$1.2 billion.
  • On August 14, the Company restarted limited scheduled commercial operations, subject to Panama’s health control restrictions on the number of flights and entry for non-citizens and non-residents to Panama and has been gradually increasing capacity since then. Capacity for the quarter represented approximately 1.5% of 3Q19 capacity.
  • The Company completed the delivery of the first EMB-190 aircraft out of 14 that have been sold to a third party.
  • Excluding the aircraft classified as assets held for sale, Copa Holdings ended the quarter with a consolidated fleet of 74 aircraft – 68 Boeing 737-800s and 6 Boeing 737MAX9s.

Subsequent Events

  • During October, the Company delivered the 2nd and 3rd EMB-190 aircraft out of 14 that have been sold to a third party.
  • On October 11, Panama lifted restrictions on the number of flights and entry for non-citizens and non-residents.
  • During the month of November, the Company signed a Letter of Intent for the sale of 2 Boeing 737-700 aircraft, to be finalized and delivered in January 2021.
  • As of November 15, the Company has restarted service to 38 destinations.
  • On November 18, the FAA rescinded the order that grounded the Boeing 737-MAX aircraft type and published an Airworthiness Directive and MAX training requirements, paving the way for a return to service.  The Company has a plan in place to comply with all new requirements and expects to return its six Boeing 737-MAX9 aircraft to service soon.
  • The Company is in advanced discussions with Boeing to reach a settlement regarding the Boeing 737-MAX grounding.  Subject to the outcome of these discussions, the Company expects to receive two Boeing 737-MAX9 aircraft during the month of December 2020.

Consolidated Financial
& Operating Highlights

3Q20

3Q19

Variance vs. 3Q19

2Q20

Variance vs. 2Q20

Revenue Passengers Carried (000s)

30

2,703

-98.9%

9

225.9%

RPMs (millions) 

57

5,466

-99.0%

15

275.7%

ASMs (millions) 

95

6,383

-98.5%

31

205.9%

Load Factor 

59.7%

85.6%

-26.0 p.p.

48.6%

11.1 p.p.

Fuel Gallons Consumed (millions) 

1.32

81.97

-98.4%

0.66

99.4%

Avg. Price Per Fuel Gallon (US$)

1.41

2.16

-34.6%

0.81

74.1%

Average Length of Haul (miles)

1,925

2,022

-4.8%

1,670

15.3%

Average Stage Length (miles)

1,081

1,295

-16.5%

727

48.7%

Departures

559

33,373

-98.3%

225

148.4%

Block Hours

1,710

109,614

-98.4%

820

108.5%

Operating Revenues (US$ millions) 

32.4

708.2

-95.4%

14.5

122.8%

Operating Profit (Loss) (US$ millions)

-107.0

132.9

n/m

-357.9

n/m

Adjusted Operating Profit (Loss) (US$ millions) (1)

-107.0

132.9

n/m

-108.7

n/m

Net Profit (Loss) (US$ millions)

-118.1

104.0

n/m

-386.0

n/m

Adjusted Net Profit (Loss) (US$ millions) (1)

-121.6

104.0

n/m

-114.6

n/m

Basic EPS (US$)

-2.78

2.45

n/m

-9.08

n/m

Adjusted Basic EPS (US$) (1)

-2.86

2.45

n/m

-2.70

n/m

Shares for calculation of Basic EPS (000s) 

42,510

42,487

0.1%

42,512

0.0%

(1) Excludes Special Items.  This earnings release includes a reconciliation of non-IFRS financial measures to the comparable IFRS measures.

Copa Holdings is a leading Latin American provider of passenger and cargo services.  The Company, through its operating subsidiaries, provides service to 80 destinations in 33 countries in North, Central and South America and the Caribbean.

Copa Holdings, S.A.

Income Statement – IFRS

(US$ Thousands)

Unaudited

Unaudited

%

Unaudited

%

3Q20

3Q19

Change

2Q20

Change

Operating Revenues

 Passenger revenue

27,619

685,337

-96.0%

10,790

156.0%

 Cargo and mail revenue

596

14,647

-95.9%

145

309.9%

 Other operating revenue

4,167

8,226

-49.3%

3,597

15.8%

Total Operating Revenue

32,382

708,210

-95.4%

14,532

122.8%

Operating Expenses

 Fuel

1,287

177,603

-99.3%

137

839.0%

 Wages, salaries, benefits and other employees’ expenses

44,241

113,398

-61.0%

38,198

15.8%

 Passenger servicing

1,095

26,204

-95.8%

402

172.4%

 Airport facilities and handling charges

1,752

47,022

-96.3%

505

246.9%

 Sales and distribution

5,985

52,980

-88.7%

3,754

59.4%

 Maintenance, materials and repairs

9,079

30,632

-70.4%

7,505

21.0%

 Depreciation and amortization

63,022

72,876

-13.5%

305,185

-79.3%

 Flight operations

454

26,572

n/m

(82)

n/m

 Other operating and administrative expenses

12,435

28,047

-55.7%

16,803

-26.0%

Total Operating Expense

139,349

575,334

-75.8%

372,408

-62.6%

Operating Profit (Loss)

(106,966)

132,876

n/m

(357,875)

n/m

Non-operating Income (Expense):

 Finance cost

(16,264)

(12,696)

28.1%

(27,056)

-39.9%

 Finance income

4,394

6,121

-28.2%

5,677

-22.6%

 Net change in fair value of derivatives

3,591

n/m

(22,198)

n/m

 Gain (loss) on foreign currency fluctuations

(370)

(9,641)

n/m

500

n/m

 Other non-operating income (expense)

(2,631)

(350)

n/m

447

n/m

Total Non-Operating Income/(Expense)

(11,278)

(16,567)

-31.9%

(42,628)

-73.5%

Profit (Loss) before taxes

(118,245)

116,309

n/m

(400,504)

n/m

 Income tax expense

(188)

12,332

n/m

(14,486)

n/m

Net Profit (Loss)

(118,057)

103,978

n/m

(386,018)

n/m

EPS

 Basic

-2.78

2.45

n/m

-9.08

n/m

Shares used for calculation:

 Basic

42,509,959

42,487,355

42,511,806

Copa Holdings, S. A. and subsidiaries 

Consolidated statement of financial position 

(US$ Thousands)

September

December

2020

2019

 (Unaudited) 

 ASSETS 

 Current Assets 

Cash and cash equivalents

222,263

158,733

Short-term investments

644,137

692,403

Total cash, cash equivalents and short-term investments

866,400

851,136

Accounts receivable, net

35,669

129,634

Accounts receivable from related parties

1,625

147

Expendable parts and supplies, net

77,481

69,100

Prepaid expenses

29,755

49,034

Prepaid income tax

9,020

1,181

Other current assets

8,546

14,206

162,096

263,301

Assets held for sale 

143,466

120,006

TOTAL CURRENT ASSETS

1,171,962

1,234,442

Long-term investments

139,503

134,347

Long-term accounts receivable

1,038

2,139

Long-term prepaid expenses

6,416

17,743

Property and equipment, net

2,203,750

2,532,402

Right of use assets

229,595

290,843

Intangible, net

97,771

108,116

Net pension asset

2,868

249

Deferred tax assets

21,714

19,216

Other Non-Current Assets

13,663

17,881

TOTAL NON-CURRENT ASSETS

2,716,318

3,122,935

TOTAL ASSETS

3,888,280

4,357,377

 LIABILITIES 

Loans and borrowings

129,667

122,581

Current portion of lease liability

89,708

97,732

Accounts payable

39,560

119,332

Accounts payable to related parties

5,101

14,086

Air traffic liability

433,145

497,374

Frequent flyer deferred revenue

88,219

80,325

Taxes Payable

6,756

46,267

Employee benefits obligations

7,350

55,373

Income tax payable

883

9,683

Other Current Liabilities

136

83

TOTAL CURRENT LIABILITIES

800,525

1,042,836

Loans and borrowings long-term

1,118,846

938,182

Lease Liability

152,234

206,832

Derivative financial instruments

94,836

Other long – term liabilities

219,400

191,221

Deferred tax Liabilities

27,283

43,397

TOTAL NON-CURRENT LIABILITIES

1,612,599

1,379,633

TOTAL LIABILITIES

2,413,124

2,422,469

 EQUITY 

 Issued Capital 

Class A -33,858,511 issued and 31,417,714  outstanding

21,196

21,142

Class B common stock – 10,938,125

7,466

7,466

Additional Paid-In Capital

90,125

86,135

Treasury Stock

(136,388)

(136,388)

Retained Earnings

1,931,191

1,718,179

Net profit 

(429,801)

247,002

Other comprehensive loss

(8,632)

(8,628)

TOTAL EQUITY

1,475,156

1,934,908

TOTAL EQUITY & LIABILITIES

3,888,280

4,357,377

Copa Holdings, S. A. and subsidiaries 

Consolidated Statement of Cash Flows

For the nine months ended September 30, 

(In US$ thousands)

2020

2019

2018

(Unaudited)

(Unaudited)

(Unaudited)

 Cash flow (used in) from operating activities 

(75,298)

548,947

377,941

 Cash flow used in operating activities 

(2,333)

(32,863)

(129,541)

 Cash flow from (used in) financing activities 

141,162

(446,953)

(316,461)

Net increase (decrease) in cash and cash equivalents 

63,531

69,131

(68,061)

 Cash and cash equivalents at January 1

158,732

156,158

238,792

Cash and cash equivalents at September 30

$               222,263

$               225,289

$               170,731

 Short-term investments 

644,137

536,084

579,246

 Long-term investments 

139,503

124,169

165,865

Total cash and cash equivalents and investments at September 30

$            1,005,903

$               885,542

$               915,842

Copa Holdings, S.A.
NON-IFRS FINANCIAL MEASURE RECONCILIATION

This press release includes the following non-IFRS financial measures: Adjusted Operating Profit, Adjusted Net Profit, Adjusted Basic EPS and Monthly Cash Consumption. This supplemental information is presented because we believe it is a useful indicator of our operating performance and is useful in comparing our performance with other companies in the airline industry. These measures should not be considered in isolation, and should be considered together with comparable IFRS measures, in particular operating profit and net profit. The following is a reconciliation of these non-IFRS financial measures to the comparable IFRS measures:

Reconciliation of Adjusted Operating Profit

and Adjusted Net Profit

3Q20

3Q19

2Q20

Operating Profit as Reported

$      (106,966)

$        132,876

$      (357,875)

   Add: Unredeemed Ticket Revenue provision reversal

$          12,341

   Add: Fleet Impairment loss

$        186,807

   Add: Expected Loss on Embraer assets held for sale

$          50,048

Adjusted Operating Profit

$      (106,966)

$        132,876

$      (108,679)

Net profit as Reported

$      (118,057)

$        103,978

$      (386,018)

   Add: Unredeemed Ticket Revenue provision reversal

$          12,341

   Add: Fleet Impairment loss

$        186,807

   Add: Expected Loss on Embraer assets held for sale

$          50,048

Add: Net change in fair value of derivatives

$          (3,591)

$          22,198

Adjusted Net Profit

$      (121,648)

$        103,978

$      (114,624)

Reconciliation of Adjusted Basic EPS

Adjusted Net Profit

$      (121,648)

$        103,978

$      (114,624)

Shares used for calculation of Basic EPS

42,510

42,487

42,512

Adjusted Basic Earnings per share (Adjusted Basic EPS)

$            (2.86)

$              2.45

$            (2.70)

Reconciliation of Monthly Cash Consumption for 2Q and 3Q 2020

Beginning Cash balance

1,143

1,127

Ending Cash balance

1,006

1,143

Net cashflows in the quarter

(137)

16

   Substract: Proceeds from Convertible Notes Offering

343

   Substract: Others proceeds (assets sold and other non-op proceeds)

22

   Add: Repayment of short term credit lines

50

95

Cash Consumption excluding extraordinary activities

(109)

(232)

Monthly Cash Consumption excluding extraordinary  activities

(36)

(77)

SOURCE Copa Holdings, S.A.