Latin 500: Copa: Small, But Strong

#326 In an industry marked by consolidation, Copa Airlines is able to remain independent, says CEO Pedro Heilbron.

Pedro Heilbron, CEO of Copa Airlines, talks to Latin Trade about the carrier’s bright outlook.

Copa Airlines in Panama may be the smallest of the top airlines in Latin America, but it stands out as a shining star because of consistent strong growth and profitability. Last year it reached revenues of $1.4 billion, a 12.6 percent increase. Meanwhile, profits reached $212 million, or 15 percent of revenues. That compares with profit margins of 5.6 percent at Brazil-based TAM (Latin America’s top airline) or 9.6 percent at Chile-based LAN.
Copa is Panama’s largest private employer, with 5,000 employees, which it expects to boost to 6,000 by the end of the year. Behind the success is Copa’s unique model of creating a hub in Panama for flights throughout Latin America as well as with other regions. Pedro Heilbron, who has been CEO of Copa for the past 20 years, recently talked to Latin Trade about the company’s outlook.

Latin Trade: After the planned merger of TAM and LAN and the merger of Avianca and TACA, Copa is the last major independent airline in Latin America. Will you merge with other groups or remain independent?
Heilbron: We have the ability to remain independent. Our financial strength and our unique business model based on strategic location of Panama — both of those factors combined [allow us to] go alone as we have done. Having said that, we would be irresponsible not to consider or not to entertain [a merger]. We always have to be aware of the game going on [and] to make the best move for shareholders, our employees and the country of Panama.

Latin Trade: Why is Copa’s Panama traffic growing so fast?
Heilbron: The economy has been doing well, but the growth is also due to that every flight leaves and lands in Panama. So when we grow, half of that growth will always be in Panama, the rest split between other cities.  … We have a very balanced network. We serve every region in the Americas, we serve a lot of secondary cities.

Latin Trade: How important has it been for Copa that Panama City’s international airport Tocumen has been expanding?
Heilbron: It’s been critical. We were obviously very pleased that the airport in Panama is being expanded from 22 to 34 gates between September and October, when 12 new gates will be inaugurated and ready by the end of the year. … The government is already talking about a new bid for a new terminal [to] keep on adding gates. We could not keep growing without that investment.

Latin Trade: How happy are you with the 2005 Aero República acquisition, and how do you view the outlook for Copa Colombia?
Heilbron: We are happy; it brought us [recognition] from a market that we weren’t serving five years ago well enough. Copa Colombia has put together an extensive flight [connection] from Colombia to Panama and also internal destinations. It has met our expectations. … We see them fulfilling a strategic role in Copa Holding. Colombia has a bright future, and [Copa Colombia’s] future is even brighter, and we’re very excited about that. Copa Colombia is in a good strategic position [in regards to] what’s happening, how the country is developing.

Latin Trade: You have been listed on the New York Stock Exchange for five years. What has been the biggest benefit of listing there?
Heilbron: If I was to highlight one benefit apart from access to new capital markets, which we haven’t yet needed, it’s been the discipline. We have to be very transparent in how we publish our financials, very disciplined in what we inform the market. That has forced us as an organization, from a financial and planning standpoint, to be world-class. And I think the market has recognized that in Copa, they get information they [look for], we fulfill our promises. That has forced us to be a better company.

Latin Trade: Will you list more shares on NYSE?
Heilbron: It’s hard to predict. It’s there, and it’s available. As we keep on expanding, there could be [a scenario] where we could access the market for additional [capital]. We have large institutional investors that are [supporting] our company. That’s kind of reassuring.

Latin Trade: How do you view the outlook for Copa the next five years?
Heilbron: I’m very bullish, I’m very positive. I’ve been in the company for many years, I’ve seen different [times], many good times, tougher times also. Our future is as bright as ever. … We’re running a solid airline, with world-class result indications in on-time performance. There are many opportunities in a region that is said to be among the fastest region in GDP growth for the next few years. Latin America will be one of the fastest-growing in terms of air traffic passenger growth the next 20 years, one of the fastest GDP regions and also fastest-growing passenger region. More people entering the middle class. We have a successful business model. …We’re bullish.

jbamrud@latintrade.com

Photo Courtesy of Copa