Prepared remarks
Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings First Quarter Earnings Call. During the presentation, all participants will be in listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, you will have to press *11 on your touch-tone phone. As a reminder, this call is being webcast and recorded on 08/06/2026. Now I will turn the conference call over to Daniel Tapia, Director of Investor Relations. Sir, you may begin.
Thank you, Alia, and welcome everyone to our second quarter earnings call. Joining me today are Mr. Pedro Heilbron, executive chairman and CEO of Copa Holdings, Mr. Robert Carey, executive vice president, and Peter Donkersloot Ponce, our CFO. Pedro will begin with an overview of the core of the quarter, Robert will then discuss commercial performance and operational highlights. Peter will conclude with a review of our financial results and outlook. Immediately after, we will open the call for questions from analysts. As a reminder, Copa Holdings' financial reports have been prepared in accordance with International Financial Reporting Standards. In today's call, we will discuss certain non-IFRS financial measures. A reconciliation of these measures to comparable IFRS measures can be found in our earnings release, available on our website. Our discussion today will also contain forward-looking statements, not limited to historical facts, that reflect the company's current beliefs, expectations, and/or intentions regarding future events and results. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially and are based on assumptions subject to change. Many of these are discussed in our annual report filed with the SEC. Now I would like to turn the call over to our Chairman and CEO, Mr. Pedro Heilbron.
Thank you, Daniel. Good morning, and thank you all for joining us for our second quarter earnings call. Before we begin, I would like to recognize and thank our more than 9,000 coworkers. Thanks to their commitment, professionalism, and disciplined execution, our team continued to deliver strong financial results while maintaining exceptional operational reliability and outstanding service to our passengers. They are the foundation of Copa's success and have my admiration and appreciation. Our second quarter results demonstrate the resilience of our business model in a significantly higher fuel price environment and reinforce our ability to continue generating profitable growth through different market cycles. During the quarter, we delivered an operating profit of $91.7 million and an operating margin of 8.7 percent. These results were affected by an increase of 85 percent in the all-in fuel cost compared to Q2 2025, with approximately 40 percent of our bookings sold before the fuel price increase. In the quarter, we grew capacity 16.5 percent measured in ASMs, while maintaining solid load factors. Our capacity additions in 2026, after years in which aircraft delivery delays slowed our growth, allow us to further consolidate our Hub of the Americas advantage, especially in an environment of strong passenger demand across our network. Looking ahead, booking trends remain strong, which support our expectations for another year of high load factors and solid financial performance. As part of our continuous efforts to strengthen the Hub of the Americas, we recently set in place our transition from 6 to 8 connecting banks beginning in March 2027. This decision will improve connectivity throughout our network, provide greater travel options for our passengers, increase aircraft utilization, optimize the use of airport infrastructure, and further strengthen Panama's position as the leading hub for intra-Americas travel. Combined with our structurally low unit cost, best-in-class operational reliability, strong balance sheet, and the unique advantages of our Hub of the Americas, we remain confident in our ability to successfully execute our growth plans and continue delivering value to our shareholders. With that, I will turn the call over to Robert who will discuss the quarter's commercial and operational highlights.
Thank you, Pedro, and good morning, everyone. Before I start, I would also like to thank our coworkers across the organization for their continued dedication and outstanding execution throughout the quarter. I have now been here two years and Copa's culture is clearly one of our strengths. Let me begin by reviewing some of the quarter's key commercial and operational highlights. Operating revenues increased 25.7 percent year over year to $1.1 billion. Passenger yields increased 8.7 percent compared to Q2 2025. Unit revenue, or RASM, increased 7.9 percent to 11.6 cents while capacity measured in ASMs increased 16.5 percent year over year. Load factor was 86.7 percent, compared to 87.3 percent in Q2 2025. Revenue performance for the quarter was partially impacted by the World Cup, which temporarily affected travel patterns during June. As a result, June load factors were 2.3 percentage points lower year over year, putting modest pressure on unit revenues. We estimate that the World Cup reduced second quarter RASM by approximately 0.1 cents. Despite this headwind, we delivered another quarter of solid revenue performance and continue to see strong demand trends throughout our network going forward. Demonstrating this strong demand, we published our July traffic numbers this week, reporting a load factor of nearly 90 percent on a year over year capacity increase of 16 percent. Furthermore, this load factor, one of our highest ever, came in a higher yield environment. As you can see from our full year guidance, we are expecting these strong load factors to continue. On the operational side, we delivered industry-leading results. During the quarter, Copa Airlines delivered an on-time performance of 90.6 percent and a flight completion factor of 99.8 percent. These results position Copa Airlines among the very best airlines globally for operational reliability and represent a key differentiator of our passenger value proposition. Turning to the network, recently we announced the addition of Porlamar, Isla Margarita, Venezuela, a popular leisure destination which will start in November. With this addition, Copa will serve 88 destinations in 32 countries throughout the Americas, further strengthening the breadth and convenience of our network and reinforcing the leadership position of our Hub of the Americas. We also recently achieved an important milestone in enhancing our passenger experience with the launch of Starlink onboard Internet. In July, Copa operated its first Starlink-equipped flight, becoming the first airline in Latin America to offer high-speed Starlink connectivity. We expect the rollout of Starlink Wi‑Fi across our fleet to be completed in the first half of 2027. Finally, on the fleet side, we took delivery of four Boeing 737 MAX 8 aircraft during the quarter, ending the period with a fleet of 131 aircraft. For the remainder of the year, we expect to receive one additional 737. As always, we maintain significant flexibility in our fleet plan through delivery options, flight rights, lease expirations, and a substantial base of unencumbered aircraft, which allows us to adjust the pace of growth if market conditions warrant. To conclude, demand trends and booking patterns remain strong. With that, I will turn the call over to Peter, who will review our results and outlook in more detail.
Thank you, Robert, and good morning. I would also like to start by recognizing our team's continued dedication to delivering industry-leading results. Their commitment remains essential to our strong operational and financial performance. In the second quarter, we reported an operating profit of $91.7 million resulting in an operating margin of 8.7 percent, compared to 21.7 percent in the second quarter of 2025. Net profit totaled $68.2 million or $1.67 per share, and a net margin of 6.4 percent. Unit cost excluding fuel, or ex-fuel CASM, remained flat year over year at 5.7 cents, reflecting our continuous focus on cost discipline. Including fuel, CASM increased 26 percent to 10.6 cents, a result of significantly higher fuel prices. During the quarter, average all-in jet fuel price increased 85 percent year over year, from $2.32 to $4.28 per gallon. Despite having approximately 40 percent of our second quarter bookings already sold before the increase in fuel prices, strong demand and higher yields enabled us to recover approximately 40 percent of the year over year increase in fuel expenses during the quarter. Our fuel recovery calculation compares the year over year increase in revenues attributable to higher RASM with the year over year increase in fuel expenses resulting from higher all-in fuel prices, both calculated using 2026 capacity levels. Turning to our balance sheet and liquidity, we ended the quarter with approximately $1.5 billion in cash, short-term and long-term investments, representing 39 percent of last 12 months' revenue. Our balance sheet remains among the strongest in the airline industry and continues to be a key competitive advantage. Total debt, including lease liabilities, stood at approximately $2.7 billion at quarter end, all related to aircraft financing. Our average cost of debt is currently 3.7 percent and we ended the quarter with a net debt-to-EBITDA ratio of 0.9x. Our financial strength continues to provide substantial flexibility as we continue to execute our long-term strategy. Turning now to shareholder returns, I am pleased to announce our Board of Directors ratified the company's third quarterly dividend payment of $1.71 per share. The dividend will be paid on September 15 to all shareholders of record as of August 31. Looking ahead, while fuel prices remain elevated and volatile relative to prior year levels, underlying demand trends across our network continue to be strong. Based on these demand strengths and current fuel cost projections, we are updating our full year outlook and now expect an operating margin for 2026 to be in the range of 17 to 19 percent, with capacity growth of between 14 to 15 percent. This outlook assumes approximately a load factor of 87 percent, a RASM of 12 cents, ex-fuel CASM of 5.7 cents, and an all-in fuel price per gallon of $3.60. To summarize, demand and revenue trends remain strong across our network, we are maintaining industry-leading cost discipline, our balance sheet remains among the strongest in the industry, and our proven business model continues to position us well to navigate the current fuel environment while delivering profitable growth and long-term shareholder value. Thank you, and we will now open the call for questions from the analysts.
Questions and answers
Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Savanthi Syth from Raymond James. Your line is now open.
Hey. Good morning.
Good morning.
I was curious — Pedro, you mentioned the second quarter was 40 percent booked prior to the fare increases. I was curious how much of the third quarter was booked prior to the fare increases? And as you look out, how much of the third and the fourth quarter are in the books today?
Okay. So in Q3, prior to the fuel price increase, we had about 20 percent, a little bit below 20 percent, booked for Q3. And, of course, much less for Q4, almost nothing for Q4. Adria, how much is the current booking level?
Savanthi, your question was what is the outlook right now for Q3 or what is the booking level for Q3 and Q4?
Correct, that is correct.
Right now, we are about 75 percent booked for Q3 and about 25 percent sold for Q4.
Perfect. And if I might, just curious — I saw there are slight changes in the delivery schedule for 2026 and 2027. Any early thoughts on how you are thinking about deliveries in 2028 as I am guessing some of those discussions are happening now?
We publish up to 2027, and we are getting 12 aircraft in 2027. As always, we have some flexibility. We are going to let go 737-700s that come up for their 20-year checks, so we will not do those 20-year checks — we will let the 737-700s go. So net will be about 10 aircraft joining Copa Holdings in 2027. We still have another set of 737-700s which we can let go, park at any time, or harvest their engines, so we also have that flexibility. But we are expecting a strong 2027. Of course, we are not guiding for 2027 yet, but we are very comfortable with the aircraft we are having delivered next year, and we think we need them all. For 2028, the number will be higher because it is almost the end of the road for all the Boeing delivery delays that we had in the last four years. However, we also have a number of lease expirations — we have six lease expirations plus the 737-700s, so we have about 11 aircraft that we could let go easily in 2028 depending on demand. Plus we have our unencumbered aircraft, which is over 40. So we have lots of flexibility. Again, we think we are going to need most of our 2028 deliveries. We will share that information towards the end of the year, but we have lots of flexibility.
Thank you. Our next question comes from the line of Duane Pfennigwerth of Evercore ISI. Your line is now open.
Hey. Thank you. As you think about the full year unit revenue guidance up roughly 7 percent on 15 percent capacity growth, so low-20s revenue growth, can you give some color on the balance of the back half? Do you expect a big variation between third quarter unit revenue growth and the fourth quarter, or is the expectation that they will look pretty similar at this point?
I will let Robert answer that question, but I will say that the number one thing that is very important is that we are seeing strong demand right now, and that makes us very comfortable with our projections as of today. I'll let Robert share some specifics.
Morning, Duane. At this point, we are seeing plus 10 percent on RASM in H2. I would say it is fairly consistent across Q3 and Q4. In terms of year-over-year variation, it is broadly somewhere between the two, so I think nothing really of note in either quarter that varies materially.
Great. Thank you. That is very clear. And then just on the trajectory of net interest expense, anything to call out into the back half of the year?
Hello, Duane. This is Peter. I would say net interest expense is pretty stable across the year, nothing to highlight. As we receive more aircraft we will have a little bit more financing cost, but it is embedded in our seed plan and pretty straightforward to calculate.
Thank you. Our next question comes from the line of Guilherme Mendes of JPMorgan. Your line is now open.
Yes. Thank you. Good morning, Pedro, Peter, Robert, and Daniel. I have two questions. The first is on the capacity guidance — the upward revision we saw this quarter. Can you share details on what is behind it? Is it just a matter of receiving more aircraft earlier than expected or anything else in terms of utilization? And the second point is on the Starlink announcement: if you don't mind sharing additional details on expected CapEx or costs associated with implementing Starlink and whether you intend to charge for it or use it as a loyalty lever. Thank you.
In terms of the increased ASM guidance: a few things. First, we were conservative with our original guidance given uncertainty on Boeing delivery dates. As the year has progressed, Boeing has been delivering on time, and at least one aircraft arrived a month ahead of schedule, with a few others arriving a few weeks earlier. We have been able to deploy those aircraft faster during the year. Plus, we have increased utilization, so we are also getting additional aircraft hours and ASMs through utilization. The combination of those factors allowed us to increase our capacity guidance, and of course the demand is there. In terms of Starlink, I will let Robert complement the answer, but the CapEx was recorded many months ago and is already included in our guidance and PP&E.
On the business model, we are excited to be the first airline in Latin America to offer this. The business model: complimentary access will be there for business class passengers, all of our preferred members — Gold, Platinum, and Presidential — as well as Starlink subscribers. Other passengers will pay for the service. That is the business model we set up.
On the CapEx, as I said, it was prepaid and will start depreciating once the service is installed. For cash purposes, it is already sitting on our PP&E.
Amazing. Super clear. Thank you all.
Thank you. Our next question comes from the line of Filipe Ferreira Nielsen of Citi. Your line is now open.
Hello, everyone. Thanks for taking my question. I have one follow-up regarding the delivery schedule related to CapEx. How does receiving aircraft earlier change your view on CapEx for the year? My second question is related to fuel and competitive behavior: you are guiding to lower fuel in the back half of the year — how is competition behaving in this environment?
Hello, Filipe. This is Peter. Regarding CapEx, we are now seeing CapEx between $700 and $750 million, basically $50 million less than what we guided at the beginning of the year. This is mostly because we are expecting one less delivery in the current year that moved a couple of weeks from December to January. That is what guides the difference. I will let Robert and Pedro talk about competition.
I do not want to get into too much detail on pricing and competition as it is a delicate subject, but so far we see a lot of discipline, triggered by the high fuel prices. As fuel prices come down, we will see what happens. We are comfortable with our guidance. I should note that before the fuel spike, average yields in our region were actually below 2019 levels — and that is without taking into account inflation — so we are comfortable that yields can be sustained as oil comes down, if not at 100 percent, but enough for a positive effect going forward.
Great. This is very clear. Thank you.
Thank you. Our next question comes from the line of Rogério Araújo of Bank of America. Your line is now open.
Hi. Thank you very much. I have a question on the second-quarter guidance. You said the margin guidance was 8 percent to 12 percent. What were the main uncertainties embedded in that range? How did those factors ultimately play out such that results landed toward the lower end of the range? Could you explore the drivers behind the guidance and what happened during the quarter? Thank you so much.
You are talking about the EBIT margin guidance for the second quarter. We had guided 8 percent to 12 percent given uncertainty related to fuel prices and how demand would respond to higher prices, so we provided a wider range than usual. We ended up within that range on the lower side, mostly due to RASM. Our unit costs were within target.
A hundred percent in target on costs. The most notable factor was RASM. Fuel was also pretty much in the range we said, which was an increase of between 80 and 90 percent year over year. The World Cup did impact us more than expected in June, which is the most notable factor we call out for being on the lower side than we expected. Everything else is smaller factors. We gave a wide range because it was early and we were trying to understand the new fuel environment — nothing else of note to call out.
And Rogério, I would also mention that we are guiding to very high margins for the year, which means we are guiding for very strong margins in the second half of the year, especially as fuel eases. Fuel is still quite high because the crack spread is very high, but we are guiding to very strong margins for H2 and for the whole year.
That is very clear. Thank you so much.
Our next question comes from Michael Linenberg of Deutsche Bank. Your line is now open.
Good morning, everyone. Two questions. First, on the step-up in the growth rate for the year: how much of that is an annualization of growth from the last 6 to 12 months versus increased utilization or stage length? Should we anticipate any additional new markets beyond Porlamar? Second, regarding the hub going from 6 to 8 connecting banks: from an infrastructure perspective, will you have tapped out gates? Will you have to hard-stand airplanes? How should we think about the facility's ability to accommodate eight connecting banks and how much more runway does that give you before major construction would be needed? Thanks.
About 50 percent of the growth is a full-year effect from what was implemented last year. Maybe around 10 percent would be new destinations, and the rest is additional frequencies. Yes, we expect to announce at least one more destination for year-end, probably before the end of August — our 89th destination to be implemented in December.
Mike, regarding going from six to eight banks, in terms of facilities this frees up capacity. We were starting to near the limits of the sixth bank structure, so this creates more capacity for growth over the coming years and eases the need for additional infrastructure. We also get internal benefits: better aircraft utilization and more options for customers. There are ongoing airport investment plans over the next five years which will help with gates and runway capacity, so the combination gives us a good runway over the next five to ten years to keep growing comfortably.
Robert, does moving to eight banks change your connection times or make it less likely you would take on the max 10 aircraft? You have the ability to exchange orders for other Max variants — does this alter that calculus?
No. Connectivity gives more options. The connection times for passengers are broadly similar on average. Aircraft decisions are not changed as a result of this — we are evaluating different fleet types for our new order but there is no change to our calculus based on the bank change.
The eight-bank will improve utilization and scheduling for passengers, and airport assets will be better utilized. We see it as a very positive development.
Great. That is music to our ears. Thank you.
Our next question comes from Jens Spiess of Morgan Stanley. Your line is now open.
Hi, everybody. Two modeling questions. One is on the buyback program: the $200 million program — I think you executed half of it. On the envelope, we are getting to about $35 million executed this quarter. How much do you have left? Is it around $65 million? Second, on the 2027 deliveries, I think you were expecting to get 12 deliveries. You mentioned one will be shifting from this year to next year. Are you now expecting to receive 13 aircraft in 2027? And more or less throughout the year, how will you be receiving them — front or back loaded?
Hello, Jens. On the buyback program, to clarify: we have executed $45 million year to date and we have around $60 million left in the program to be executed. As always, whenever we finish we will request authorization for an additional program. On the delivery schedule, there are small movements as we get closer to delivery. Most movements are a week or so and December deliveries moving into January do not change ASM counts for this year because that plane would not have flown in the current year. For 2027 the 12 deliveries are pretty evenly spaced throughout the year.
Perfect. Thank you.
Our next question comes from Alberto Valerio of UBS. Your line is now open.
Thank you. Good morning, gentlemen. I have one question on demand: oil price went up, costs went up 85 percent per gallon, you could pass through a part of it and you look like you kept that pass-through to the remainder of the year. Could you detail where this demand is coming from — is it strong across your network: South America, North America, Central? Any specifics? Also, you mentioned airlines were leaving some profitability on the table before — how resilient do you think these yields are? Thank you.
We see strength throughout our network; there is not one region that is doing much better or much weaker — demand is healthy across the board. The diversity of our network is an asset and it is positive now that everything is doing well.
To add, it is pretty consistent across markets that demand is showing positive signs and yield increases are coming through. Brazil and North America are slightly stronger on the margin, but overall everything is doing very well.
On resilience: before the fuel spike, average yields in our region were below 2019 levels — not accounting for inflation — and we had record quarters even with those yields. So if fares adjusted up due to fuel and then come down somewhat as fuel eases, there should remain a net positive effect. We are positive about the sustainability of the price increases' residual impact.
Very clear. Thank you very much.
This concludes the question-and-answer session. I would now like to turn it back to Pedro Heilbron, chairman and CEO, for closing remarks.
Thank you. Thank you all for participating in our Q2 earnings call and for your continued support. You have a committed Copa team always working hard to improve results, and we have a very positive outlook for how this year is going to turn out. Again, thank you, and have a great day.
Ladies and gentlemen, thank you for participating. You may now disconnect.