Advertisement
YOU ARE HERE: LAT HomeCollections

GLOBAL CAPITAL

Latin Airline Finding Its Niche

Catering to business travelers, Copa takes off with flights to underserved destinations via its hub in Panama City.

July 08, 2006|Chris Kraul | Times Staff Writer

PANAMA CITY — Good economic times create an updraft for air travel, which helps explain why Panama-based Copa Airlines is flying high.

Banking, construction and tourism are all booming here; economic growth last year soared 6.4%. If the proposed expansion of the Panama Canal and construction of a refinery by Occidental Petroleum materialize, the economy could keep growing for years to come.

Panama's neighbors, which provide Copa with most of its 32 destination cities, also are prospering. Analysts expect Latin America and Caribbean economies to expand 4.6% this year, topping growth in 2005.

That's why Latin Americans are hopping on airplanes like never before to travel for business and pleasure.

The trend is evident in last year's financial results for Copa Holdings, the airline's parent firm, whose stock is traded on the New York Stock Exchange. The company posted a 51% gain in revenue to $608 million and a 21% boost in net income to $82.7 million.

Last year, the airline saw 25% year-over-year growth in each of the industry's major performance measures, including revenue, total passengers and available seat miles, a common measure of aircraft capacity.

Latin America is a booming market for other global and regional airlines. According to Aviation Monitor, the major U.S. carriers' passenger traffic in and out of Latin America and the Caribbean rose 29% in 2005 compared with the previous year.

What is unusual about Copa's success is that it is not in the budget-priced segment, the part of the industry that has experienced the most growth in recent years. Gol of Brazil and Ryanair of Ireland, for example, have helped to revolutionize air travel by making it affordable for lower-income passengers.

By contrast, Copa targets "must go" business travelers -- about half of its passengers -- who are looking to save time and are willing to pay premium prices.

Copa has appealed to them by initiating service to underserved cities frequented by Latin business travelers, said Ben Laidler, an equity analyst with UBS Securities in Santiago, Chile.

"Copa has no ambitions to become British Airways or Lan Chile," he said. "They are sticking to their knitting, which is serving medium-sized cities in the Andes, Caribbean and Central America where their sphere of influence is."

The boom times are especially visible in Panama. Copa's hub at Tocumen International Airport here is adding eight gates this year in a major expansion project to bring the total to 22.

The airline, which has a fleet of 24 Boeing 737s and Embraer 190 regional jets, all purchased since 1998, has 21 more planes on firm order.

Although the airline's executives don't like to broadcast it, Copa was given a boost by the 9/11 attacks in the United States. Tighter U.S. security means Latin American travelers have a much harder time getting transit visas to pass through Miami, Houston or Los Angeles on their way to or from Central and South America destinations.

To avoid the hassle, many choose an airline with a hub in Latin America -- such as Copa or TACA of El Salvador -- and make connections to Mexico, the Caribbean or South American destinations, with a stopover in Panama City or San Salvador, instead of Miami.

How much new business the shifting travel patterns have created for Copa is hard to pinpoint. "It's a marginal but real difference," Laidler said.

Interviewed in his office near Tocumen airport, Copa Chief Executive Pedro Heilbron acknowledged a post-9/11 dividend.

Copa has trimmed three hours off the travel time from Caracas, Venezuela, to Guatemala and from Sao Paulo, Brazil, to Managua, Nicaragua, Heilbron said.

"What 9/11 did was made certain travelers see that Panama made sense. It gave us more stability," said Heilbron, who likes to refer to his airline's home base as the "Hub of the Americas."

Analysts say that the airline is shrewdly managed. Copa broadened its market, modernized its fleet and streamlined its operations, mainly as a result of its 1998 alliance with Continental Airlines in which the Houston-based carrier bought a 49% interest in Copa and entered into frequent-flier and code-sharing arrangements.

Continental gave Copa invaluable lessons in running a reservation system and operating efficiently, Heilbron said.

"We needed outside help and it's given us better range and performance," he added.

Previous cooperative ventures between U.S. and Latin American airlines have rarely worked out. But the Copa-Continental marriage seems to have fed passengers to each partner. Both companies are expanding and adding flights.

A young fleet means Copa planes have fewer breakdowns, a factor in the airline's five straight years of posting on-time performance of 90% or better, among the best in the business, said Bobby Booth of Avman, an airline consulting firm in Miami. "Bringing in Continental was a great decision," he said.

Advertisement
Los Angeles Times Articles
|
|
|