Jos Juan Mara William Valentina

$115.41
TARGET PRICE

BUY
RECOMMENDATION
26.06%
UPSIDE

$91.55
CLOSING PRICE
January 4th 2017

$
STRONG COMPETITIVE FAVORABLE LEADING OPERATING CONSISTENT FINANCIAL
POSITIONING DYNAMICS METRICS PERFORMANCE
 $
STRONG COMPETITIVE FAVORABLE LEADING OPERATING CONSISTENT FINANCIAL
POSITIONING DYNAMICS METRICS PERFORMANCE

65% OF COPAS PASSENGERS

ARE FROM UNDERSERVED MARKETS

LEGACY NETWORK
THAT NEED A HUB

AIRLINES
STRONG COMPETITVE FAVORABLE STRONG POSITIVE RISKS
POSITIONING DYNAMICS PERFORMANCE VALUATION
 $
STRONG COMPETITIVE FAVORABLE LEADING OPERATING CONSISTENT FINANCIAL
POSITIONING DYNAMICS METRICS PERFORMANCE

LOW COST CARRIERS

STRONG COMPETITVE FAVORABLE STRONG POSITIVE RISKS
POSITIONING DYNAMICS PERFORMANCE VALUATION
 $
STRONG COMPETITIVE FAVORABLE LEADING OPERATING CONSISTENT FINANCIAL
POSITIONING DYNAMICS METRICS PERFORMANCE

Geographic Location

Service Oriented strategy

At least 50% Market Share

In 45% of CPAs markets.

STRONG COMPETITVE FAVORABLE STRONG POSITIVE RISKS

POSITIONING DYNAMICS PERFORMANCE VALUATION
 $
STRONG COMPETITIVE FAVORABLE LEADING OPERATING CONSISTENT FINANCIAL
POSITIONING DYNAMICS METRICS PERFORMANCE

Latin Americas
Most On Time
Carrier
(FlightStats)

STRONG COMPETITVE FAVORABLE

POSITIONING DYNAMICS
 PORTERS ANALYSIS
Pricing strategies and wars
Mature stage

Large amount of capital needed to operate

Licensed routes
Access to slots at airports

Airplane manufacturers
Covenants

Fast and reliable Individual flyers- Agencies-OTAs

Level of convenience and efficiency Increasing popularity of OTAs and apps
Customers cost of time Decision: quality, price, convenience
 $
STRONG COMPETITIVE FAVORABLE LEADING OPERATING CONSISTENT FINANCIAL
POSITIONING DYNAMICS METRICS PERFORMANCE

2X AIR TRAFFIC WILL DOUBLE

IN THE NEXT 15 YEARS

Sources: ICAO,Airbus GMF 2015

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
 $
STRONG COMPETITIVE FAVORABLE LEADING OPERATING CONSISTENT FINANCIAL
POSITIONING DYNAMICS METRICS PERFORMANCE

CPAS REVENUE (US$MM)

3,500
North America: 25% 3,000
GDP Growth 17: 2.2% 2,500
2,000
Latin America: 75% 1,500
GDP Growth 17: 1.6%
1,000
500
GDP UP TO 2021: -

2020
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

2021
+2%
Source: Company Data & Team Estimates

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
 $
STRONG COMPETITIVE FAVORABLE LEADING OPERATING CONSISTENT FINANCIAL
POSITIONING DYNAMICS METRICS PERFORMANCE

HIGHEST
LOAD FACTOR 3Q 16: 84%

80.4%

79.2%

79.2%
76.7%
76.9%

76.7%
76.4%
75.9%

75.4%

75.2%
74.6%
74.0%
73.1%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Company Data & Team Estimates

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
 $
STRONG COMPETITIVE FAVORABLE LEADING OPERATING CONSISTENT FINANCIAL
POSITIONING DYNAMICS METRICS PERFORMANCE

0.070.0746
Ex-Fuel Cost per ASM
Trend
0.0722
LOWER MAINTENANCE
0.0704 COSTS

0.0690 MODERN FLEET

0.0677 LOWER SALE COST &

0.0673 0.0657 COMMISIONS
PASSENGER SERVICING
0.0637
0.06 COST x ASM
2008 2010 2012 2014

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
 $
STRONG COMPETITIVE FAVORABLE LEADING OPERATING CONSISTENT FINANCIAL
POSITIONING DYNAMICS METRICS PERFORMANCE

+15 years
EXPERIENCE
Jose Montero
CFO
Michael New
VP of Safety
Pedro Heilbron Daniel Gunn
Catalina Bretn CEO COO
WINGO General Manager

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
 $ SOUND CASH GENERATION
OTHER
FINANCIALS
Free Cash Flow to Equity
535,960 567,051
492,273 470,590 496,668

352,651 378,665
326,427 313,586 320,646

29,167 18,412 33,730 37,031 38,027

(195,014) (175,416)
(209,752) (220,340) (226,412)
2017 2018 2019 2020 2021
Operating Cash Flow CAPEX Cash Flow Net Borrowing Free Cash Flow to Equity

Source: Team Estimates

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
 DEBT COMPOSITION
$ Including Operating Leases
OTHER
FINANCIALS

ADJUSTED NET DEBT/EBITDAR

Operating COPA 2.8X

Leases, 30.3%
Financial
Debt, LATAM 5.9X
69.7%
AVIANCA 6.2X

Source: Companies Data & Team Estimates

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
MULTIPLE ANALYSIS DISCOUNTED CASH TARGET
EV/EBITDAR FLOW FCFE PRICE

70%
+ $ 30%
= $115.41

$115.41
TARGET PRICE

26.06%
 FREE CASH FLOW
DISCOUNTED CASH
FLOW FCFE

TO EQUITY PRICE: $109.66

$
Revenue
Country Risk Weighted Risk
Country Comp.
Premium Premium
Cost of equity Weight
Panama 17% 1.92% 0.32%
Risk Free-Rate 2.44% USA 25% 0.00% 0.00%
Beta 1.48 Brazil 13% 3.95% 0.51%
Colombia 8% 2.51% 0.19%
Market Risk Premium 5.69%
Other LATAM 38% 4.73% 1.79%
CAPM 10.86%
Weighted Ave. Country Risk Premium 2.81%
Country Risk Premium 2.81% Sources: Damodaran, EMBI and Team Analysis
Adjusted CAPM 13.68% TERMINAL GROWTH RATE
Sources: Team Analysis Jan 4th 10y US bond 2.44%

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
 MULTIPLE ANALYSIS
EV/EBITDAR

PRICE: $117.87

TICKER PEER NAME PRICE(JAN4TH) ROI (5Y) GROWTH(5Y) MKT CAP (US$ BN)

AVH Avianca Holdings 10.05 5.47% 12.83% 1.16

LFL Latam Airlines 8.42 3.63% 22.17% 5.6
ADR Gol Linhas Aereas Intelligents 16.40 -9.44% 8.57% 0.59
JBLUE JetBlue Airways Group SA 22.65 6.19% 11.84% 6.73
HA Hawaiian Holdings 57.85 13.36% 12.16% 3.1
SKYW SkyWest Inc 37.45 2.72% 3.2% 1.87
WJA WestJet Airlines Lt 23.73 9.43% 10.08% 2.70

CPA Mix on ROI (12.31%) & Growth (14.30%) explains historical premium behavior on multiple.

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
 MONTE CARLO

MONTE CARLO SIMULATION

YIELD

GDP

JET FUEL

INTEREST RATES

UTILIZATION HOURS

BLOCK HOURS BY ASM

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
RISK
Risk Matrix

20
 $
Deterioration of GDP Lower Margins
Growth

Revenue by Countries & Proactive in moving

Regions capacity to potential
GDP Growth of
markets
Latin America
North America Panama
25% 16%

Uncertainty about
Reforms in USA Other South Brazil
American 13%
Countries
23% Central
America and
Venezuela Caribbean
2% 13%
Colombia
Yield Demand 8%

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
 $
Deterioration of GDP Lower Margins
Growth

Oil Price 104.1

96.2

54.9 58.8 62.9

Jet Fuel
50.8 48 51.4
37

Yearly Average

2006 2008 2010 2012 2014 2016 2018 2020

Labor Cost
CPA hedges

30% Lower Jet fuel x

ASM

1.32
1.41
1.39

1.32

1.31
1.36

1.29

1.29
1.42
1.44

1.28
Operating Expenses
Of Fuel Consumption 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
 $
Deterioration of GDP Lower Margins
Growth

Lower Labor
Cost per ASM
Jet Fuel

Labor Cost

Operating Expenses

STRONG COMPETITVE FAVORABLE DYNAMICS STRONG POSITIVE RISKS

POSITIONING PERFORMANCE VALUATION
 Sensitivity Analysis
TORNADO ANALYSIS
Yield is the most sensitive variable after Jet Fuel
Cost. Yield is highly sensitive to GDP Growth.
YIELD
JET FUEL
LOAD FACTOR 143.16

BLOC HOUR
120.69 121.93
113.37 116.42
LABOR COST 110.69 109.15 111.08
109.45 112.39
105.07 107.31 104.97
101.62 103.45 101.43
97.67 99.44
Pass. Servicing/Rev 92.69
86.97

Average Aircraft Utilization 71.45

YIELD Oil Growth
Interest Rate 10.00% 30.00%
Load Factor 50.00% Bloc Hour
70.00%
Growth 90.00%

LAT GDP Growth Labor Cost

 $115.41
26.06% TARGET PRICE

UPSIDE

BUY
RECOMMENDATION
Total 12M Return
with dividends:

29.22% $91.55
CLOSING PRICE
January 4th 2017

$
STRONG COMPETITIVE FAVORABLE LEADING OPERATING CONSISTENT FINANCIAL
POSITIONING DYNAMICS METRICS PERFORMANCE