Copa Airlines will be phasing out its Embraer 190 aircraft and moving to a Boeing-only fleet faster than originally expected, while eagerly awaiting the Boeing 737 Max’s return to service, the Panama-based carrier tells analysts during the airline’s quarterly earnings call.
“As part of its plan to increase efficiencies, the company has decided to accelerate the exit of its E190 fleet and is planning to sell the remaining 14 aircraft over the next 18 months, three years earlier than previously planned,” Copa says in a statement on 14 November. “This anticipated exit could result in a book loss in the range of $90 million related to the sale of the aircraft and spare parts inventory.”
As it awaits the return of the 737 Max, Copa chief executive Pedro Heilbron says E190s have fulfilled their mission and the company looks forward to significant financial and operational benefits from flying a 737-only fleet. Routes covered by the 100-seater Embraer regional jet will in the future be operated by larger-capacity 737NGs or replaced by the Max, once it returns to service.
“We are at a point where we are better off with a single fleet, because there are both cost and operational advantages,” Heilbron says. “This might be less profitable in the short term, but the net-net benefit for the airline is positive.”
“Long term this does not mean that we will not operate another smaller gauge aircraft again, but this is the right decision for us at this time,” he says, adding that there is flexibility in the timing of the Embraer retirements. “We are working our fleet needs depending on the needs of the market or other realities like the Max grounding.”
Copa says it has removed all Max aircraft from its schedule until “mid-February 2020”.
“It’s going to be a little bit messy next year with aircraft coming in and going out and crew transitions,” Heilbron says. “Then there will be a spool up in that there will be some markets where it will take some time for those loads to be more profitable in an NG versus the Embraer.”
Copa currently has six 737 Max grounded and was to have taken delivery of another seven during the course of the year. Now executives say the airline expects to receive up to double that number of new aircraft in 2020.
“With the delays in the delivery of the Max and now the large number of aircraft we expect to get next year - 14 - we decided that is the perfect timing to start getting rid of the E190s,” Heilbron says. “It’s the prudent decision given everything that is going on.”
Heilbron did not quantify what kind of compensation Copa expects from Boeing for what will likely be a year-long grounding following two accidents which killed 346 people. Negotiations with the airframe manufacturer on that topic had not yet begun, he says.
Copa reported a third quarter net profit of $104 million, up from $57.6 million in the same period a year earlier. Load factor rose increased 1.4 percentage points to 85.6% and total revenue rose 5.3% to $708.2 million.
Heilbron also tells analysts Copa still plans to file an application along with its Star Alliance partners United Airlines and Colombian flag carrier Avianca for a three-way joint venture in the coming months. The project has been delayed due to Avianca’s restructuring, but it remains a priority for all three carriers, he adds.
“The fact that we are planning to go forward with the JV is a signal that we feel that the three networks together add value to our customers and to the three airlines,” he says
The Star Alliance carriers unveiled the deal for the joint venture in November 2018. The accord would require approvals from regulators in several countries, including the USA's Department of Transportation, which has to grant anti-trust immunity. Once the airlines officially apply for the joint venture in writing, it will take up to two years to go into effect, pushing the planned collaboration into 2021 at the earliest.