SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

Report of Foreign Issuer

 

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

 

Report on Form 6-K dated for the month of February 2021

 

 

Copa Holdings, S.A.

(Translation of Registrant's Name Into English)

 

 

Boulevard Costa del Este, Avenida Principal y Avenida de la Rotonda

Urbanización Costa del Este

Complejo Business Park, Torre Norte

ParqueLefevre

Panama City, Panama

(Address of principal executive offices)

 

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

 

Form 20-F    X        Form 40-F             

 

(Indicate by check whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

 

Yes                  No     X    

 

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b);82-             )

 

 

 

 

 

 

 

 

 

 

 

 

Enclosure: 4Q20 Earnings Release

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SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

 

 

 

Exhibit 99.1

 

 

Copa Holdings Reports Financial Results for the Fourth Quarter of 2020

Panama City, Panama --- February 10, 2021.  Copa Holdings, S.A. (NYSE: CPA), today announced financial results for the fourth quarter of 2020 (4Q20). The terms “Copa Holdings” and “the Company” refer to the consolidated entity.  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 fourth quarter of 2019 (4Q19).

The financial information included in this press release is preliminary, as the Company has not yet issued its audited financial statements.  This information presented herein may differ from those results. During the preparation of the financial statements and related notes and our year-end audit, additional items that would require material adjustments to the preliminary financial information included in this press release may be identified.

Due to the continued effects of the Covid-19 pandemic on the aviation industry, the Company operated on average, at approximately 27% of the capacity for the same period in 2019.  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, not meaningful or not material on such a limited operational base.

OPERATING AND FINANCIAL HIGHLIGHTS

 

 

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Subsequent Events

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MANAGEMENT’S COMMENTS ON 4Q20 RESULTS

After the lifting of significant travel restrictions in October 2020, the Company began rebuilding its network, restarting service to 51 destinations by the end of the year.  Capacity deployment, measured in terms of available seat miles (ASMs) reached 15% in October, 28% in November, and 39% in December, as compared to the same months in 2019.  These capacity figures were supported by better-than-expected demand, resulting in a load factor of 75% for the quarter.  In terms of cash consumption, the Company benefited from changes in working capital, as cash proceeds increased as a result of future of capacity growth, while our cash outflows lagged given the timing of certain accounts payable.  This resulted in an average cash consumption for the quarter of US$6 million per month, a significant improvement from the Company’s original expectations.  Despite the encouraging results in the fourth quarter, increasing Covid-19 cases and new international travel requirements and restrictions have stalled demand starting in the second half of December, which, along with working capital changes, will lead to a larger cash consumption in the first quarter of 2021.

The Covid-19 pandemic continues to challenge the aviation industry in an unprecedented way and is forcing most airlines around the world to make significant changes in the way they conduct their business.  From the outset of the crisis, our management team has taken proactive actions, focusing on reducing fixed costs, further bolstering the Company’s liquidity position and adjusting the Company’s size, for what we believe will be a weakened demand environment in the immediate future.

Even though we face a great deal of uncertainty, we believe we are taking the necessary measures to maintain a position of strength in terms of liquidity, an efficient cost structure, network plans and flexible capacity, while maintaining a strong focus on bio-safety protocols in order to maintain the competitive advantage that has allowed us to deliver consistently leading results for over 20 years.

The Company has a proven and very strong business model, which is based on operating the best and most convenient network for intra-Latin America travel from its Hub of the Americas® based in Panama’s advantageous geographic position, with the region’s lowest unit costs, best on-time performance, and strongest balance sheet. Going forward, the Company believes that its Hub of the Americas® will be an even more valuable source of strategic advantage, especially if fewer intra Latin America markets are able to sustain direct point to point service.  We believe our hub will be the best positioned to serve these markets. The Company expects to leverage its strong balance sheet, leading liquidity position and lower cost base to continue strengthening its long-term competitive position and to implement initiatives to further strengthen its network and product in the post Covid-19 world.

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OUTLOOK FOR 1Q21

As a result of the uncertainty regarding the Covid-19 pandemic and the impact of further travel restrictions, the Company is not providing financial guidance for full year 2021. However, subject to Covid-19 developments, including new government restrictions and changing travel demand, among other factors, the Company currently expects its capacity in 1Q 2021 to reach approximately 2.6 billion ASMs, or approximately 40% of the capacity during 1Q 2019. Total revenues are expected in the range of US$170 million to US$200 million, or approximately 25% to 30% of total revenues for 1Q 2019. Cash consumption, excluding any proceeds from asset sales and extraordinary financing activities, but including capital expenditures and payment of all financial obligations, is expected to increase to a range of US$40 million to US$45 million per month for 1Q 2021.   

Despite the previously mentioned increase in cash consumption, the company expects to increase its liquidity position during the quarter as a result of cash inflows from aircraft pre delivery deposits reimbursements, financing related to aircraft deliveries, aircraft sales and other items.

CONSOLIDATED FOURTH QUARTER RESULTS

Operating revenue

Consolidated revenue for 4Q20 totaled US$158.6 million, driven mostly by passenger revenue.

Passenger revenue totaled US$147.5 million, mostly comprised of flown passenger revenue and unredeemed ticket revenues, some of which correspond to earlier quarters in 2020.

Cargo and mail revenue totaled US$7.2 million, in line with the reduced capacity for the quarter.

Other operating revenue totaled US$3.9 million, resulting mostly from revenue from non-air ConnectMiles partners.

Operating expenses

Fuel totaled US$28.3 million, corresponding to 20.7 million gallons of jet fuel consumed in the quarter.

Wages, salaries, benefits and other employees' expenses totaled US$63.6 million, representing a 44.7% reduction year over year, mostly comprised of a reduced payroll given contract suspensions and voluntary pay cuts offset by severance payments performed during the quarter.

Passenger servicing totaled US$4.2 million, representing a 38% cost reduction per passenger year over year, resulting from cost efficiencies and a simplified on-board product offering.

Airport facilities and handling charges totaled US$16.9 million, representing a 37% higher cost per departure year over year, due to parking fee provisions for stored aircraft, volume rebates attained in 2019 and not in 2020 due to lower capacity, and higher fees in certain U.S. airports.

Sales and distribution totaled US$18.6 million, representing a 13% decrease in cost per net booking year-over year-due to contract renegotiation and reduced marketing expenses.

Maintenance, materials and repairs totaled US$33.2 million, comprised of a US$23.8 million adjustment in provisions related to the future return of leased aircraft given changes in aircraft utilization and expected return dates, US$6.4 million in material and component repairs, and other expenses including aircraft storage and return to service expenses.

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Depreciation and amortization totaled US$67.9 million, mostly comprised of owned and leased flight equipment, maintenance events, IT systems amortizations and a US$4.4 million impairment charge related to the Boeing 737-700 fleet.

Flight operations totaled US$5.9 million due to overflight fees, in line with the reduced number of flights operated in the quarter.

Other operating and administrative expenses totaled US$15.0 million, which is mostly comprised of IT systems, overhead expenses and one-time advisory fees.

Non-operating Income (Expense)

Consolidated non-operating income (expense) resulted in a net expense of US$91.5 million.

Finance cost totaled US$18.4 million, driven by US$ 11.6 million convertible notes interest expenses, US$6.4 million related to loan interest and commission expenses and US$2.1 million in interest charges related to operating leases, net of a US$1.7 million adjustment related to the reduction of the discount rate utilized for the calculation of leased aircraft charges.

Finance income totaled US$3.6 million in proceeds from investments.

Net change in fair value of derivatives totaled a net US$80.1 million unrealized mark-to-market loss related to the Company’s convertible notes.

Gain (loss) on foreign currency fluctuations totaled US$2.4 million, mostly because of the strengthening of the Colombian peso and the Brazilian real against the dollar.

Other non-operating income (expense) totaled US$1.0 million, mostly due to a tax provision reversal.

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About Copa Holdings

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. For more information visit: www.copa.com.

 

CONTACT: Copa Holdings S.A.

Investor Relations:

Ph: 011 507 304-2774

www.copa.com (IR section)

 

This release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current plans, estimates and expectations, and are not guarantees of future performance. They are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statement. The risks and uncertainties relating to the forward-looking statements in this release are among those disclosed in Copa Holdings’ filed disclosure documents and are, therefore, subject to change without prior notice.

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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:

 

 

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