Copa 2Q15 Earnings Call Notes

The regional economic environment has weakened further during the quarter

“So to summarize, we are not pleased by our second quarter financial results. The regional economic environment has weakened further during the second quarter and we expect additional demand and yield pressure during the second half of the year mainly from Venezuela, Brazil, and Colombia. We’re taking the necessary commercial actions to mitigate this impact and are fine-tuning capacity in our markets while at the same time optimizing and strengthening our networks.”

Things were fine up until June and then currencies and economies weakened

up to June the quarter was looking much better. June came in really weak, weaker than what we were expecting and even the way we were managing for June was for a stronger June, but late bookings did not come in. And in general, the economies and the currencies weakened. So that had big influence in how we are forecasting the rest of the year, even though we do not have a good visibility yet for the fourth quarter, for September somewhat but we still have to wait for late bookings in September and the rest of the quarter.

We need stability more than anything

A next year, it’s too early to tell in November we will give you a preliminary guidance for 2016, but more than anything what we need is stable currencies and stable economies, as not as much that we need growth to rebound to what it used to be a year or two years ago”

Analyst remark: you should just LBO the company

ou have an extremely robust balance sheet, very low leverage ratios. If there is a sense that your stock has stopped going down and we’ve sort of been pricing in the worst of it, why not just take the entire thing out and LBO the company if you feel like the stock has bottomed here and things are not going to get worse.”

July was a little better, but partially because we knew June was so weak

“So the business was already weak in the quarter, but not as weak as June, June was by far the weakest month in the second quarter. In July which is one of our peak months in the year, we see traffic getting back to let’s say an acceptable level, but in part was because we were already kind of alerted that by June that was not as strong as expected. So July did better in terms of load factor, but with yields depressed like we saw in the quarter.”

June would have had better load factors if we had known late bookings wouldn’t come in

“June would have had better load factors if we had known ahead of time that late bookings were not going to come in as strong as we expected.”

This is worse than 2009

“we did not see as much weakness in 2009, we did not have the currency devaluation that we have seen right now, which are in some cases up to 30% and 35%. So we did not see that in 2009, there was some certainty in 2009 but the economies were still growing, I don’t have all the figures on my mind right now, but the economies were still growing and actually 2010, 2011 were strong growth years for most of the economies in Latin America.”

On top of the weakness there’s more capacity

“So I think in that sense it’s quite different, plus there has been more capacity growth overall from Airlines, from Latin America, the U.S. et cetera in the last 12 to 24 months in many markets, which would be fine if the economies were growing and the currencies were strong, but when that changes then there is kind of a land grab.”

Venezuela demand is being impacted because local carriers accept bolivars and we wont

“you also have local carriers that can sell in Bolivar we cannot because we would not get our dollars to take them out of the country, so it makes no sense for us to sell in Bolivar. But local carriers are selling in Bolivar’s are taking a big chunk of the local traffic, thanks to that advantage”

El Nino is impacting the region

“El Nino as we know, it’s affecting our region. The last time that happened I think it was 15 years ago, like 15 years ago and the Panama Canal actually had to limit the draft of the ships going through due to the lower water levels at our main lake that are part of the Panama Canal system. And they’re talking that might be necessary again, it maybe next month, maybe in September or October, we don’t think it will have a huge impact in the economy or in our business. But it’s something that the government is dealing with right now.”