As economic growth in Latin America fueled more demand for air travel in recent years, a small Panama-based carrier saw the opportunity to soar.
Copa Airlines, which began as a domestic airline in 1947, took the risk of investing heavily in expanding its service to Central and South America, the United States and the Caribbean, adding new planes and personnel, acquiring a Colombian airline and focusing exclusively on international service.
Today, Copa is one of the largest and most successful air carriers in Latin America. Copa’s 83 aircraft fly to 64 destinations in 29 countries and carried more than 10 million passengers last year.
In 2011 Copa Holdings, which owns Copa Airlines and Copa Colombia, posted operating revenues of $1.8 billion, up 29 percent from 2010, and net income of $310.4 million, up 29 percent.
For the first three quarters of 2012, Copa, with 8,000 employees, logged even stronger financial results and continued to add new aircraft and destinations. Last year, Copa, which has an on-time performance of more than 90 percent, added flights from Panama to Las Vegas, Recife (Brazil), Liberia (Costa Rica), Willemstad (Curacao) and Iquitos (Peru).
“What we see today is what we’ve built over the last 20 years,” said Pedro Heilbron, a Panamanian who has been CEO of Copa since 1988. “We saw that we were in the middle of the continent, a very favorable geographical location, and that it was very difficult to travel in the region, with passengers forced to take multi-stop flights... So we connected the dots for intra-Latin American travel, added direct flights, expanded our hub in Panama City and adopted international quality standards.”
Miami is an important element in Copa’s growth strategy and is home to the airline’s headquarters for North America, which includes the U.S., Mexico, Canada and the Bahamas. Copa has 65 employees in Miami, including sales/marketing staff, finance and airport operations for passengers and freight.
“Miami is one of Copa’s major U.S. destinations and, in fact, was Copa’s first U.S. destination in 1989,” Fernando Fondevila, Copa’s Miami-based regional manager for North America, said in an e-mail. The airline offers five flights every day from Miami and two additional flights five days a week. It has also added flights to Panama City from Chicago, Orlando, Las Vegas, New York City, San Juan, Puerto Rico, and Washington, D.C.
While Copa does not release figures on passenger traffic for specific destinations, its overall traffic grew by an average of 9 percent per year between 2007 and 2012. Last year it increased by 18 percent, reaching more than 10 million passengers, and Miami is its largest North American market.
“It’s only a 2 hour and 45 minute flight from Miami to Panama and Copa offers more flight options and destinations in Latin America — 57 — than any other hub in the continent,” Fondevila said.
Heilbron pointed to several elements critical to Copa’s growth strategy, starting with capital investment. “We invest about $250 million to $300 million per year, mostly in new aircraft,” he said.
Copa’s fleet is made up of 57 Boeing 737-700s and 800s, plus 26 Embraer 190s. This year it is adding seven of Boeing’s latest generation 737s, and expects to have a fleet of 90 aircraft by year end.
The company also has invested millions of dollars in expanding its Hub of the Americas in Panama City, so it can offer frequent flights to more destinations. In previous years, travelers from Panama to South America often had to make a stop in Miami.
Copa went public in 2005 to be better positioned to finance is growth plan, and the same year acquired Aero República, a large Colombian passenger airline.
Heilbron also pointed to Copa’s strategic alliance in 1998 with Continental Airlines (now United Airlines). “We adopted their international service standards, their training techniques, their frequent flyer program, and co-branded our clubs and liveries. ... As a result, a small airline was able to develop world-class standards.”
To keep up with growth, Copa last year was adding about 100 new employees per month, Heilbron said.
The stock price has been growing fast, too, and recent performance has far outpaced the average performance of airline stocks. Shares closed at $110.51 Friday, giving it a one-year return of 73 percent. Thomson/First Call reported that three analysts gave Copa Holdings shares a “strong buy” rating, 10 assigned a “buy,” three gave them a “hold” rating and no analysts rated them “underperform” or “sell.”
In a recent report, Raymond James analysts said: “We continue to rate Copa Outperform because of its strong unit [revenue] growth, desirable hub location, defensive market position in the rapidly growing Latin America air travel market and attractive valuation.”
Heilbron sees more growth ahead after the Panama Canal expansion is completed. “Canal-related businesses — including banking and other services — will experience new growth and Panama will gain importance as a hemispheric logistics center. This will provide new opportunities to Copa.”