Panama based airline holding company Copa Holdings, S.A. (CPA) has proven once again that an airline can actually make money. Copa is the holding company for Copa Airlines and Aero Republica. The two airlines now serve 45 destinations in 24 countries including several in the U.S.
As an airline here are some of the things I think Copa does right. I have flown the airline several times and have first hand experience with its service.
- A fleet of only two models of modern, fuel efficient aircraft.
- Excellent customer service and on-time flights.
- Controlled expansion into a growing regional market.
- An easy to understand and consistent fare system.
On the financial side, Copa had an excellent 4th quarter (Call Transcript). During the 2nd and 3rd quarters the company had sub par results (but still profitable) due to a massive increase in fuel costs. For Q4 of 2008, CPA had net income of $1.20 per share, a 46% increase from the same quarter of 2007. Excluding special items, the net was $1.48 per share. For all of 2008 Copa earned $3.50 per share compared to $3.72 in 2007. Excluding non-cash, mark-to-market fuel hedge adjustments the net for the year was $3.97. At the end of 2008 Copa had $408 million in cash or 32% of annual revenues.
The global economic slowdown does not seem to be affecting Copa. Traffic growth in January was 15%. The company generates approximately 50% of its business out of Panama, which is projected to have GDP growth of 4% to 6% for 2009. Company management is forecasting business growth of 13% for 2009. Consensus estimates have CPA earning $4.21 for 2009 however, I see the company easily making $4.50 based on the 4th quarter results, low energy costs and projected growth factors.
In normal times, CPA would be a $50 stock. I hope at some point in the near future the market realizes that there still are companies that can grow their businesses and profits.
Disclosure: CPA is a component of my site’s Opportunities Portfolio.