Panama's Copa Airlines will reduce seat capacity to Venezuela by about 40% in the next three months, as the carrier continues to wait for funds to be repatriated from the South American country.
The capacity reduction from May to July will significantly reduce the carrier's exposure to the Venezuelan bolivar while ensuring that the airline maintains its service to the Venezuelan market, says Copa's chief executive Pedro Heilbron in an earnings call today.
Heilbron says the capacity reduction will be done through downgauging of aircraft and redeployment of about 1.5 aircraft that will go towards the addition of frequencies in other markets where there is higher demand.
Copa estimates that it has $496 million in Venezuela waiting to be repatriated.
The capacity reductions to Venezuela will impact Copa's operating margin by less than one percentage point, says Heilbron today. However, the airline continues to maintain its full-year operating margin guidance of 19-21% for 2014. Heilbron says Copa believes its margin can still fall within that range despite the cuts to Venezuela.
Even with the cuts, the airline expects to still operate around 16 flights a week to Caracas, he says.
Copa also operates to Maracaibo and Valencia in Venezuela.