Copa Airlines Raises Liquidity While Refusing State Aid

Pedro Heilbron, Copa Airlines’ CEO, said that the airline is not requesting, nor expecting, any aid from the Panamanian government. He added that currently, the government has more significant issues to deal with. In the meantime, the airline has managed to reinforce its liquidity with a $350 million bond offering.

Copa Airlines
Copa Airlines refused State aid. Photo: Tomás del Coro via Flickr.

Copa Airline’s solid first quarter

The Panamanian airline delivered excellent results in January and February. However, by the second week of March, Copa Airlines saw “significant weakness in demand, as the first cases of Covid-19 were detected in [the] region.” 

From 22 March, the airline stopped flying altogether after the government of Panama imposed travel restrictions. Since then, Copa Airlines has not operated any flight, and is not expecting to until 1 June. Even then, the airline will start with just 12% of its original schedule. So, like many other airlines, Copa will have terrible results for the second quarter. By the end of the year, Copa plans to ramp up its operation to 40%. 

The airline ended the first quarter with $595.45 million in consolidated operating revenues. The net profit for Copa was $74.27 million. Also, the company saw an increase in its debt, from $1.06 billion to $1.17 billion. 

Copa Airlines
Copa Airlines currently has six Boeing 737 MAX grounded. Photo: airbus777 via Flickr.

Copa increases its liquidity

To face the current crisis, Copa Airlines managed to increase its liquidity. It has done this in two ways. First, the company obtained unsecured, committed credit facilities with three Panamanian banks. The aggregate amount is $150 million and remains unutilized. 

Then, the airline “bolstered its cash position by successfully closing a $350 million convertible senior notes offering, maturing in 2025.” The objective is to build “a fortress of cash,” as Heilbron said. 

At the moment, Copa Airlines is one of the most financially stable carriers in Latin America. The airline has $1.13 billion in cash but expects to spend $750 million in the next nine months. Consequently, this means the airline could burn up to 70% of its available money by December.

Copa Airlines
Will Copa get rid of its E190 fleet? Photo: Tomás del Coro via Flickr.

Bye-bye to the Boeing 737-700

A month ago, Pedro Heilbron said that the current crisis would set Copa back almost 30 years. This means the Copa Airlines at the end of 2020 will look like the Copa of the earli 90s.

The statement also means that Copa Airlines will reduce the size of its fleet. Currently, the Panamanian carrier has 106 aircraft, including six Boeing 737 MAX that have not flown since March 2019. 

However, Copa Airlines is planning to retire early its fleet of 14 Boeing 737-700 NG planes. The plan is to focus on a younger fleet composed of Boeing 737-800 NG instead.

There was no specific word on the 15 Embraer E190 airplanes Copa is currently using. But it is safe to assume that the airline will continue with its plan towards a unified model fleet. 

“[Copa hopes to realize] significant cost and revenue benefits from operating a single-Boeing fleet…While we will most likely end up taking a significant number of MAX aircraft next year, most of them will be used to replace the outgoing 100-seat Embraer aircraft,” said Pedro Heilbron last year, as reported by Air Transport World.

Eventually, hopefully, Copa will be able to utilize its new Boeing 737 MAX jets and take delivery of more. The airline will indeed benefit from the efficiencies of a single-Boeing fleet, as GOL does in Brazil and Southwest in the US.

What do you think of Copa Airlines’ plan to face the crisis? Let us know in the comments.