Off the charts - Trade Talk

Latin Trade, Oct, 2002 by Mary Dempsey

The airline industry is calling 2002 its worst year ever. Most Latin American carriers are struggling with debt, falling passenger traffic and whopping new security costs. But two turned a profit last year: One of them was Panama's Copa. (The other was LanChile.) Not only has 55-year-old Copa weathered the industry's recent upheaval, but it booked profits in nine of the last 10 years. Copa CEO Pedro Heilbron talks to LATIN TRADE's Upfront Editor Mary Dempsey about the company's strategy.

How did Copa sidestep industry-wide problems?

For one thing, our geographic location in Panama plays a role. Studies on the cost of landings and overflight charges and fees show that Latin America is the most expensive place to do business. Panama does not have some of those fees. Also, we haven't bought other airlines or got into markets where we shouldn't be. We're very focused.

You weren't as affected as your competitors by the travel downturn following the terrorist attacks in the United States. Why is that?

Seventy-five percent of our business is within the region; only 25% of our flights touch U.S. runways. The biggest part of our market held steady.

How can you make money when other airlines can't?

We're very bottom-line focused overall and conservative in terms of costs. In mid-2001, we saw things slowing down so we cut costs. We're slightly ahead of last year in terms of revenue. We're below in cost. Our load factor is up. The revenue growth is not huge, but anything north of zero sounds good in aviation these days.

Are there differences between the U.S. and Latin American aviation landscapes?

Although some carriers were shaken up by 9/11 and there are challenges from smaller carriers like JetBlue, the U.S. aviation scene is pretty much settled. It's clear who the key players are and what regions they dominate. In Latin America, you get new carriers right and left.

Has the game changed since 9/11?

The change is that the established players are playing a more conservative game.

When you allied with Continental, you changed your logo and colors to match Continental's.

We made a decision that was thought out. We wanted to take our product and our airline toward Continental. They had a more recognizable image. We adapted our frequent flier program to theirs. Copa bought the same planes as Continental and configures the seating the same. We serve the same food and have the same in-flight services. Their passengers use the same VIP lounges as ours. The President's Club in Panama City was half paid for by Continental. They own 49% of us.

You've been on a buying spree, haven't you?

We bought two new planes in July 2002. We'll add one in November and one in December. We have ... 737-200s that we need to replace so I expect we'll announce soon that we'll have a new order for 12 aircraft--that's six firm and six options-to-buy. The total fleet goal is 24 [new planes] by 2009, but that's the company's most conservative estimate of future fleet size. I expect it to be 50% larger than that by then.

What's next for Copa?

In 2003, we'll start e-ticketing. Latin Americans still use travel agencies rather than the Internet for travel services, so we'll let travel agents book e-tickets, too.

What else?

We want second frequencies for Bogota and Medellin. We also want more frequencies in Mexico.

You've been having trouble getting authorizations for those flights.

Governments are protecting carriers when they should be protecting users.