Flight Patterns
Copa Airlines CEO Pedro Heilbronn weighs in on growth strategies, consolidation and the importance of a strong hub.
By Mark Chestnut
Copa Airlines is in growth mode — and expansion isn’t likely to slow down much in the near future, according to Pedro Heilbron, CEO of Copa Holdings S.A. “Between 2011 and 2013, for those three years, we grew at an average compounded annual growth rate of around 20 percent,” he said. “That’s very high in any industry, especially in aviation, and we never said we’d maintain or sustain that kind of growth rate in the future. But if you go back and look at the last 10 years, we’ve grown an average of between 10 and 15 percent. So what we’ve said is that, going forward, we can sustain in that range; low double digits. And we’re pretty confident. There will be ups and downs, but we’re pretty confident that we can keep a low-double digit growth rate.”
This year alone, Copa Airlines announced plans to increase its capacity by 10 percent, by adding eight new Boeing Next Generation 737-800 aircraft — the largest Boeing order in the airline’s history, which will increase its total fleet to 98 aircraft. In addition, the company announced new service to Montreal, Fort Lauderdale and Georgetown, Guyana. Heilbron also credited the strength of the Star Alliance, which Copa joined in 2012, with helping to build the airline’s presence internationally.
In May 2014, the month for which the most recent statistics are available, Copa’s system-wide passenger traffic increased 12.6% over the previous year, according to the company. The system load factor for May 2014 was 77.9%, a 2.6 percentage point increase compared to May 2013.Copa Holdings reported net income of US$151.4 million for the first quarter of 2014. Excluding special items, Copa Holdings would have reported an adjusted net income of $153.6 million, or $3.46 per share, a 23.5% increase over adjusted net income of US$124.4 million and US$2.80 per share for the first quarter of 2013.
As Copa focuses on adding new cities and increasing its frequencies and fleet, it is increasingly surrounded by other carriers that have merged to grow bigger. Copa itself hasn’t participated in any unions as large as LAN and TAM or Avianca and TACA (the company did buy Bogota-based AeroRepública in 2005 and rebranded it as Copa Airlines Colombia in 2010). But Heilbron said that overall, consolidation has “been good for the industry. We now have a lot of healthy airlines, which was not the case maybe eight years ago. It’s not good for the general public to have troubled airlines. The general public, the cities, the economies, want reliable, consistent air service.”
Will there be more consolidation? “Probably,” Heilbron answered. “There are still opportunities worldwide, but so far I think it’s been good for the industry and, in general, I think it’s been good for the countries.” However, he doesn’t see Copa Airlines joining together with another airline for the time being. “We’re never closed to anything,” he explained. “However, up to now, we’ve felt that we can be successful on our own, following our own path the way we’ve been so far.”
Another strategy that is not currently on the table is trans-oceanic expansion, which would require investment in new aircraft beyond the existing Boeing 737 and Embraer 190 narrow-body planes that the company currently operates. Aside from partnerships with other carriers, trans-Atlantic or trans-Pacific service is “not in our plans right now,” Heilbron said. “I cannot say that we’ll never consider it. I’m sure there’ll be a time in the future when we should consider it, but it’s not in our five-year plan, so it’s not something we’re thinking about right now.”
The Importance of Panama
Copa Airlines focuses heavily on connecting passengers from around the Americas; a little more than half of its customers connect in its so-called Hub of the Americas at Panama City’s Tocumen International Airport, rather than staying or originating in the city. But nevertheless, the carrier’s success is closely linked to the stability and growth of its home base in Panama, according to Heilbron.
“It’s a two-way street,” he explained. “Panama is mainly a service economy; it’s not like we produce much. In that service economy, the main sectors, in no particular order, are the canal; we have tourism, we have the financial center, we have a large import-export zone, so commerce is very important. We are also a growing base for multinationals that set up their regional headquarters in Panama. Most of those sectors depend on air connectivity. And in many ways the reason why those sectors are growing so much in Panama is because of the growth of the Hub of the Americas, Copa’s hub in Panama. And we also grow because of them. So it’s a perfect win-win, a two-way street where we help the country, the country helps us.”
A crucial part of Copa’s relationship with Panama — and its overall growth strategy — is the continued expansion of Tocumen International Airport. “It’s critical,” Heilbron said. “It’s our one hub airport. We’ve centralized our operations there, and most of our flights. We have some operations out of Bogota, but Bogota is more of a focus city. So if Tocumen doesn’t grow, we will be limited. Luckily, Tocumen has continued investing in its growth and modernization. Right now there is a project going on — the new south terminal, which should be ready in two and a half years, and it’s going to take us from 34 to 54 gates. They’re adding 20 gates. So we feel comfortable with our facility in Panama.”
Heilbron loves to sing the praises of his company’s home base, of course, but he also noted that “there are a number of nice airports throughout Latin America that are friendly to passengers” — pointing out that airports in Bogota, Lima, Santiago de Chile and Quito are among the best. But he added that from a business perspective, in the case of some airports, “we wish they were a little bit less expensive” for airlines to serve.