Panama City is a center of world commerce and trade and Copa Airlines has found a way to capitalize on its convenient location, benign climate, and international importance. As a bit of history, the airline was started in 1947 and initially seeded by Pan American World Airways, which went bankrupt in 1991. Copa went public in 2005 and has been led by Pedro Heilbron as CEO for the past 25 years; his tenure as CEO is one of the longest in the history of aviation. Today, almost six decades after its founding, Copa is one of the most admired and profitable airlines in the world and its success is primarily due to its commitment to keeping a close alignment between its business and operating models and a laser-like focus on execution.
Copa’s approach to running its business, according to a former executive, is centered on saying “no” about 80% of the time. What this means in practice is that the management is committed to staying disciplined about their business initiatives and objectives, while consistently communicating their values and performance metrics to all employees. There are a few elements of Copa’s business and business models that are particularly important in understanding how the airline has maintained a net margin of 13-16% over the past ten years, an achievement rarely seen in the commercial airline industry.
Panama City’s location gives Copa a few unique competitive advantages that the airline has had the continuous wherewithal to leverage. For one, the city is located between many destinations that, on their own, don’t have sufficient traveler demand to justify point-to-point service. Consequently, Copa has positioned itself as an “aggregator,” consolidating traffic and routing flights that connect these locations through its Panama City hub. Good weather year-round and a well-developed airport also help: the airline has a consistent on-time performance of 85-92% and a completion rate of 99.4-99.6%, statistics almost unheard-of among other carriers. Copa is so committed to serving its particular region that at the International Society of Transport Aircraft Trading (ISTAT) Latin America Forum Copa’s CEO said that despite the economic troubles plaguing many countries in South America, the airline has no intention of starting to serve Europe.
No airline can succeed without a well-structured fleet. Given Copa’s business model’s focus on being the “connector” airline through its Panama City hub, the airline has focused on operating only two models of aircraft: Boeing 737 (-700 and -800) and Embraer 190. The distance these two aircraft can fly as well as their fuel consumption rates are well-matched with the destinations served by Copa, as well as with its financial objectives, which is why the airline has said “no” to other, “shinier,” aircraft types over the years. The management knows the needs of its customers and is meeting them in the most efficient manner possible. At the same ISTAT meeting mentioned above, the airline reaffirmed that it has no plans to expand its fleet to include larger aircraft. It’s worth noting, also, that limited fleet variety also helps the company control its maintenance costs, which are a large part of an airline’s expense structure.
Internal and external relationships
In addition to the CEO’s 25-year tenure at the company, Copa’s other senior management team members have also been with the airline for an average of a decade and a half. As a result, the team operates on a basis of friendship and trust and consistently works together to achieve the airline’s business objectives. One of these objectives is to maintain ongoing communications with Copa’s broader employee base. Given the airline’s focus on being cost-disciplined, employees know to avoid unnecessary complexity in their day-to-day operations and focus on executing the well-explained “game plan” as a cohesive unit. The team functions so well that Copa has been named twice as one of the top 10 best employers in Latin America.
In terms of external working relationships, Copa interacts closely with numerous partners and is extremely synergy-focused in its approach. For instance, by being one of the largest employers in Panama, with almost 6,000 local staff, Copa has a close relationship with the government’s country, which helps it navigate political and economic hurdles when they arise. Additionally, the airline is highly reliant on Panama City’s airport; together, the airport and the airline have worked to enlarge the existing infrastructure, thus helping Copa execute its hub-and-spoke strategy. To ensure continuing alignment, Copa has a representative on the airport’s corporation board. Lastly, Copa is an integral member of the Star Alliance. Previously, Copa was 49% owned by Continental airlines. Today, although United (which bought Continental) no longer has any ownership stake in Copa, the two airlines continue to share branding and marketing activities, benefiting both companies. To this day, when viewed side-by-side, Copa’s and United’s logos are exceptionally similar.
Overall, Copa’s strategy of sticking closely to its business model and objectives is executed through careful operational planning and communication with internal and external partners. I am quite excited to be flying with Copa via Panama City on my way down to my FIELD 2 project in Buenos Aires.
Bell, Michael and Thomas, John. Airline Business. Nov. 2015, p. 48-49
Copa Airlines Website (http://www.copaair.com/sites/us/en/pages/homepage.aspx)
Karp, Aaron. Air Transport World. Nov.2014, Vol. 51 Issue 11, p30-33
Unnikrishnan, Madhu. Air Transport World. Dec. 2015. Online Blog: http://atwonline.com/airframes/panama-s-copa-pulls-back-fleet-expansion-weak-economy