UNITED STATES

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 November 2022

 

 

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: 3Q22 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.

 

 

 

 

 

 

Copa Holdings Reports Financial Results for the Third Quarter of 2022

 

Panama City, Panama --- November 16, 2022.  Copa Holdings, S.A. (NYSE: CPA), today announced financial results for the third quarter of 2022 (3Q22). 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 third quarter of 2019 (3Q19) (which the Company believes are more relevant than year-over-year comparisons due to the significant impact of the COVID-19 pandemic in 2020 and 2021).

 

OPERATING AND FINANCIAL HIGHLIGHTS

 

Subsequent Events

 

 

 

 

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MANAGEMENT’S COMMENTS ON 3Q22 RESULTS

Despite the notable impact that higher jet fuel prices had on the Company’s operating costs, Copa Holdings delivered strong financial results for the third quarter. The fuel cost increase was offset by higher revenues and a lower ex-fuel CASM.

 

During the third quarter, the Company reported a net profit of US$115.9 million or US$2.93 per share. Excluding special items, comprised of an unrealized mark-to-market gain of US$1.6 million related to the Company’s convertible notes as well as an unrealized mark-to-market loss of US$0.7 million related to changes in the value of financial investments, the Company would have reported a net profit of US$115.1 million or US$2.91 per share.

Copa Holdings reported an operating profit of US$143.7 million, and an operating margin of 17.8% for the quarter, compared to an operating profit of US$132.9 million and an operating margin of 18.8% in 3Q19.

Capacity (ASMs) for 3Q22 decreased by 0.6% compared to 3Q19, while passenger traffic, measured in terms of revenue passenger mile (RPMs), increased by 0.8%. As a result, load factors for the quarter increased by 1.2 percentage points to 86.8%.  

Total revenues for 3Q22 increased 14.3% to US$809.4 million, as compared to 3Q19. Passenger revenue for 3Q22 came in 13.0% higher than 3Q19, while cargo revenue was 80.2% higher. Yields increased 12.1% to 14.1 cents and revenue per available seat mile (RASM) increased 15.0% to 12.8 cents.

Unit cost (CASM) came in at 10.5 cents, an increase of 16.4% compared to 3Q19, driven by higher fuel costs. Excluding fuel, CASM came in at 5.9 cents, a 5.3% decrease when compared to 3Q19.

After the losses related to the Covid pandemic, we have seen a steady improvement in our financial results. Excluding special items, comprised of an unrealized mark-to-market net gain of US$102 million related to the Company’s convertible notes as well as changes in the value of financial investments, year-to-date the Company would have reported a net profit of US$157.7 million, compared to the US$244.3 million realized YTD 2019.

YTD Q3 Adjusted Results Progression 2019-2022

 

* - Only excluding mark-to-market effect of financial instruments

The Company ended the quarter with a cash balance of US$1.1 billion, which represents 42% of the last twelve months’ revenues.

The Company has a proven and very strong business model, which is built on operating the best and most convenient network for intra-Latin America travel from its Hub of the Americas^® based on Panama’s advantageous geographic position, low unit costs, best on-time performance, and a strong balance sheet. Going forward, the Company expects to leverage its strong balance sheet, leading liquidity position, and lower cost base to continue strengthening its long-term competitive position by implementing initiatives that will further reinforce its network, product, and cost competitiveness.

 

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OUTLOOK FOR 4Q22 AND 2023

 

As a result of the current volatility in the economic environment, the Company will provide financial guidance only for the fourth quarter of 2022 and preliminary capacity guidance for 2023.

 

Mainly driven by a quarter-over-quarter increase in unit revenues, the Company expects an operating margin of approximately 22% for 4Q22, or 4 percentage points higher than 3Q22. The Company expects capacity in 4Q22 to reach approximately 6.5 billion ASMs or a 6% increase as compared to 4Q19 ASMs.

 

 

Factored into this outlook is a load factor of approximately 88%, Unit Revenues (RASM) of approximately 13.7 cents, unit costs excluding fuel (Ex-Fuel CASM) of approximately 6.0 cents, and an all-in fuel price of US$3.75 per gallon.

 

For the full year 2023, the Company expects to increase its capacity by approximately 15% versus 2022.

 

CONSOLIDATED THIRD-QUARTER RESULTS

Operating revenue

Consolidated revenue for 3Q22 totaled US$809.4 million, mainly driven by passenger revenue.

 

Passenger revenue totaled US$774.2 million, a 13.0% increase compared to the same period in 2019, mostly driven by 12.1% higher yields. The third-quarter results are mostly comprised of flown passenger ticket revenue, passenger-related ancillary revenue, and unredeemed ticket revenue.

 

Cargo and mail revenue totaled US$26.4 million, an 80.2% increase compared to the same period in 2019, related to higher cargo volumes and yields.

  

Other operating revenue totaled US$8.8 million, mainly revenues from non-air ConnectMiles partners.

 

Operating expenses

 

Fuel totaled US$291.5 million, an increase of 64.1% compared to the same period in 2019 with 7.7% fewer gallons consumed and a 76.6% higher effective fuel price.

 

Wages, salaries, benefits, and other employee expenses totaled US$96.6 million, representing a 14.8% decrease compared to the same period in 2019, mainly driven by a reduced headcount.

 

Passenger servicing totaled US$18.9 million, a decrease of 27.9% compared to the same period in 2019, because of a simplified onboard product offering.

 

Airport facilities and handling charges totaled US$49.8 million, an increase of 5.9% compared to the same period in 2019, mostly related to higher airport costs, mainly in the US.

 

Sales and distribution totaled US$60.7 million, an increase of 14.6% compared to the same period in 2019, due to higher sales compared to 3Q19.

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Maintenance, materials, and repairs totaled US$23.6 million, a decrease of 23.0% compared to the same period in 2019, due to a reversal of US$7.2 million in the Company’s provision related to the return of leased aircraft. Excluding the US$7.2 million reversal, maintenance, materials, and repairs would have increased by 0.5% when compared to 3Q19, mainly due to more component repairs.

 

Depreciation and amortization totaled US$68.8 million, mostly comprised of owned and leased flight equipment, maintenance events and IT systems amortizations, a decrease of 5.6% compared to 3Q19, mainly due to lower aircraft lease rates.

 

Flight operations mostly related to overflight fees, totaled US$25.5 million, a decrease of 4.1% compared to the same period in 2019, driven by 5.7% fewer departures, partially offset by an increase in overflight fees due to fleet and route mix.

 

Other operating and administrative expenses totaled US$30.4 million, an increase of 8.3% versus 3Q19, mostly related to a higher quantity of leased spare engines.

 

Non-operating Income (Expense)

 

Consolidated non-operating income (expense) totaled (US$15.5) million.

 

Finance cost totaled (US$22.5) million, mostly comprised of convertible notes interest expenses of US$10.7 million, US$7.8 million related to loan interest and commission expenses, and US$1.2 million in interest charges related to operating leases.

 

Finance income totaled US$4.5 million in proceeds from investments.

 

Gain (loss) on foreign currency fluctuations totaled (US$3.3) million, mainly driven by the devaluation of the Brazilian real and the Colombian peso.

 

Net change in fair value of derivatives totaled a US$1.6 million unrealized mark-to-market gain related to the Company’s convertible notes.

 

Other non-operating income (expense) totaled US$4.2 million mostly due to the sale of two 737-700 airframes previously leased to a third party, partially offset by an unrealized mark-to-market loss of US$0.7 million related to changes in the value of financial investments.

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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 countries in North, Central, and South America and the Caribbean. For more information visit: www.copaair.com.

 

CONTACT: Copa Holdings S.A.

Investor Relations:

Ph: 011 507 304-2774

www.copaair.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 several 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 Operating CASM Excluding Fuel. 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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