Panama flight |

Panamanian airline Copa is making a big bet: You’re tired of waiting around in overrun airports for long flights home.

To make the most of its central location between north and south, it is billing itself as a so-called “hub of the Americas.” Traditionally Miami and Silo Paulo have been the main points for jetting among Latin American airports, but that could change. The regional market, especially business travelers, has proven to be a lucrative niche.

Passengers say they like the shorter flights they take on Copa planes. Paolo Allegrini, South and Central America sales manager for the Plymouth, a U.S. rubber company, says he spends more than half of his working time flying up and down the Americas. Traveling from Brazil to Medellin or Caracas may be a bit of a headache, but connections at Panama City are swift and quite hassle free, he says. “The Panama hub is a great convenience,” he says. “Most of the time it works out quicker and much cheaper than Varig.”

While Copa has done all it can to boost business by making connections less stressful for high-margin business passengers, politics may help it out even more. Panama City has thrown its hat into the ring to host the permanent secretariat of the Free Trade Area or the Americas (FTAA), a hemispheric trade pact being negotiated by the 34 countries in the hemisphere. The city that lands this secretariat will create thousands of jobs. Miami and Port of Spain, Trinidad, among others, are also vying for the spot.

Even as fuel costs rise and competitors pull back, the carrier hasn’t been afraid to grow. From its Tocumen airport base in Panama City, Copa has expanded its network to 31 destinations in 20 countries, including most of South America’s capital cities. In January, Copa added new routes to Buenos Aires and the number of weekly flights with Brazil has risen to 11. It’s now adding a new daily flight to Sao Paulo and to Buenos Aires and increasing the number frequencies it services to other destinations such as Cancun and Orlando, Florida.

Copa, which is private, does not reveal how much money it makes, but it is an expanding airline in a crisis-ridden industry. Its available seat mileage rate, which measures its capacity to carry passengers, grew 13% in 2003. In 2004, the company expected traffic to grow another 13% and then jump to 21% in 2005.

Emboldened, in 2004 Copa bought 10 Embraer 190 jets. The airline has an option to buy another 20, which could bring the deal to $900 million. It was the first order for that type of aircraft by a Latin American carrier. The purchase also adds to its fleet of 29 Boeing 737s.

Copa CEO Pedro Heilbron brushes off concern about any increased overhead and the extra costs of maintaining a fleet of mixed aircraft. Before the purchase of the Embraer planes, Copa operated only Boeing planes. “We took a close look at all the factors involved, and this was the best option,” he says. “We end up gaining from this choice.”

Purchasing aside, the carrier will strengthen the synergies it has with Continental by joining the Sky Team international alliance of airlines, which includes Air France-KLM and Delta Airlines. Copa is now an associate member.

Strength. Even suppliers say Copa is a success. “It’s a business model for the industry. Few airlines have been able to weather the storm in recent years,” says Fred Curado, vice president of Embraer. “Fleet diversification is a brave move. It’s exactly what JetBlue has been doing,” Curado says, referring to U.S. low-cost pioneer JetBlue.

Copa Chairman Alberto Motta, now well into his 80s, recalls years ago when he joined Panamanian carrier Copa as a director. While still the controlling stakeholder in Copa, Motta today has taken a backseat to day-to-day company affairs. His most telling business move dates back from 1998, when he sold a 49% stake in Copa to Continental Airlines for an undisclosed sum.

The backing of a solid international partner allowed him to expand the company well beyond Central America’s borders. It also gave the airline enough financial muscle to endure the bruises the airline industry would take in the wake of the Sept. 11 attacks in the United States. “This considerably strengthened our credit position as we were able to start buying aircraft and expand,” says Motta.

Once upon a time, Copa flew only to Costa Rica on a DC-3 aircraft. Today, the carrier flies 1.6 million passengers a year across the hemisphere. It has a long way to go: American Airlines, long the region’s biggest carrier, says it has 703 planes and flew 15 million passengers through its Miami hub.

THIERRY OGIER * PANAMA CITY

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