13

Situated on the isthmus that links Central andSouth America, Panama City has historicallyserved as a crossroads between the Americas.And like the Bridge of the Americas, whichspans the Pacific gateway to ‘The Canal’,Panamá’s Copa Airlines is quietly andsuccessfully building bridges of its ownbetween the Americas.

Formally registered as Compañía Panameña de Aviación,Copa Airlines may not yet be a household name to manyoutside Central America, but for Pedro Heilbron, the airline’spresident and CEO, that is not a concern. “Copa could nevermeasure success based on size…we tie together small markets,but we have a world-class product that is just as good as some ofthe world’s best airlines,” Heilbron tells Airways. “Besides, aslong as our customers favor us then we will be successful.” Andsuccessful it is. Although he is unable to release any financialdata, Heilbron claims that Copa is profitable, and passengernumbers have continued to increase—from 860,000 in 1998 tomore than 1.1 million in 2002.

W h i l e t h e a i r l i n e h a s r e c e n t l y e x p e r i e n c e d atransformation, Copa had a humble beginning more than 55years ago when the Panamanian government and Pan Americanformed the company in 1944. Operations, initially on domesticroutes, began in 1947 using Douglas DC-3s, later supplementedby Curtiss C-46s. Modestly, the route system was expandednorth to San José, Costa Rica, Managua, Nicaragua, and SanSalvador, El Salvador, and south to Colombia. Copa added itsfirst turbine-powered type, a Hawker Siddeley (BAe) 748, in1965, but later acquired a Convair 340. In 1971 (the year thatPan Am sold its interest) Lockheed 188 Electras arrived.

Copa’s first 40 years were unremarkable, but that allchanged in 1988 when Heilbron was brought aboard. “I wasworking for a group of Panamanian businessmen who becamemajority shareholders in the airline. They asked me to moveover to Copa,” he says. Heilbron did not have any previousairline experience, but notes that running the company was notdifficult. “It might have been different had the airline beenbigger, but we were really a one-and-a-half ’plane operation. Wehad two aircraft, a Boeing 737-100 and a 737-200 combi, whichwas flying passengers only half the time. Our revenues wereonly $25 million, and we flew 160,000 passengers a year.”

Through much of its early history, Copa never really soared,

Copa AirlinesBridging Panamá and the Americas

by Ken Donohue

CO

RR

IE D

ON

OH

UE

Copa aircraft line up at Tocumen Airport, Panama.

14 April 2003

but instead maintained a level flightpath, barely making it onto the industry’sradar screen. “I wouldn’t say the airlinewas mismanaged, as much as it wasmanaged without a vision. No one paidmuch attention to it,” muses Heilbron.

When he took control of the airline,shareholders did not have any specificideas or goals, but believed that if thecompany were better run it wouldflourish. The first thing Heilbron wantedto do was coordinate flights with rivalAir Panamá Internacional (API), thegovernment-owned flag carrier which, atthe time, enjoyed a better reputationthan Copa. “Our route network consistedmostly of Central America, while AirPanamá primarily served South America,but there were few flights betweenCentral and South America,” remembersHeilbron. “So, I proposed that wecoordinate flights and services, whichwould benefit both airlines.” Butthis idea never came to fruition. Thegovernment, a military dictatorship, feltthat Copa was not supportive of itspolicies, so it ordered API not tocooperate. But a dark chapter inPanamá’s history was about to changethe fortunes of both Copa and API.

On December 20, 1989, the USA,under the auspices of Operation JustCause, attacked Panama City withairborne and ground forces. The goalwas to protect American lives, maintainthe security of the Panama Canal,restore democracy to Panamá, and tocapture General Manuel Noriega, thePanamanian leader, and bring him tojustice. After taking refuge in theembassy of the Vatican for more thantwo weeks, Noriega finally gave himselfup. He was flown to the US where hewas convicted on eight counts ofracketeering, drug trafficking, and moneylaundering, and sentenced to 40 yearsin prison.

The new government, which haddefeated Noriega in a previous election,quickly began selling all unproductivestate-owned operations. As a result, APIclosed its doors after attempts to privatizethe airline failed. “That decisionobviously helped us,” admits Heilbron,“but there wasn’t room for two airlines inPanamá anyway.” Heilbron further statesthat governments are not efficientmanagers of airlines, and argues that itwas not only good for Copa, but alsogood for Panamá. Thus, in the earlyNineties, Copa busied itself on creating asuccessful hub and an airline thatPanamanians could be proud of. Today,Copa’s ‘Hub of the Americas’ atAeropuerto General Omar TorrijosHerrera, commonly known as AeropuertoInternacional de Tocumén—Panamá’s

international airport—is a large part of its success. “Central American airlines werebusy competing with US airlines on routes to the USA,” notes Heilbron. “Copa had theluxury of not being in the American market, so we focused instead on an intra-LatinAmerican network.”

During the mid-Nineties, expansion at Copa accelerated as the airline receivedsome destinations and routes that had previously belonged to API. These includedQuito, Guayaquil, Bogotá, Lima, and Caracas. Between 1992 and 1998, Copa had acommercial agreement with the Central American Grupo TACA (Transportes AéreosCentro Americanos) conglomerate, but the most significant development in theairline’s history came in 1998 when the airline signed a comprehensive accord withContinental Airlines. Implemented in May 1999, the deal saw Continental acquire a

Types used by COPA during its first four decades include the Douglas DC-3, HS 748,and Lockheed Electra.

PHO

TOS:

FRA

NZ

MA

NFR

EDI

15

49% stake in the Panamanian airline, and Copa’s image waschanged to better reflect its new partner. New aircraft werepurchased, and as these were options that Continental held,the configurations were the same. Continental personnelcame to Panamá, and Copa adopted the larger airline’smaintenance procedures, passenger handling procedures,and Computer Reservations System (CRS). Copa’s board ofdirectors now consists of four Panamanians and three fromContinental Airlines.

Heilbron bristles at the notion that this agreement maybe seen as limiting Copa’s independence. “Countries worrymore about independence…we are in the business of beingsuccessful,” he stresses. Heilbron does admit that in some casesthe deal with Continental might restrict Copa, although he

believes that in the end it will make it better. “The airlinebusiness is all about networks, and with the agreement, Copahas a much larger market,” explains Heilbron. “We can offermore than any other Latin American carrier, and let’s not forget,Continental’s network to Central and South America hasincreased.” Panamá is geographically in the best location,Heilbron points out. “That is definitely one of our strengths. Wealso have brand-new aircraft, which along with our efficient hubat Tocumén, has led to an enviable on-time performance recordof more than 90 percent.” When told that our flight fromHavana, the previous day, was 40 minutes late, Heilbron smiles.“I didn’t say we were 100 percent. “Yesterday was a terrible dayfor on-time performance, yet we still finished the day at 75percent.” Indeed, Copa’s on-time performance is a source ofgreat pride for the airline’s 2,300 employees. In 2002, Copa hadsome 15 days of perfect on-time performance. (On our returnflight, we arrived at the gate 30 minutes before departure andfound most of the passengers already on board. We pushed backfive minutes before schedule.)

Heilbron does not credit one thing or individual withCopa’s achievements. “We have the right people, with the rightfocus…everyone is clear on what we need to do be a successfulairline.” He also quickly notes that many of the airline’sweaknesses were solved with the Continental allianceæeconomies of scale, networks, and shared technical expertiseand knowledge.

While the airline is pleased with its performance, there aretwo immediate concerns that it must address: Tocumén androute rights. According to Heilbron, the airport needs tomodernize and expand to keep pace with Copa’s future plans.“In terms of gates and aircraft access to the terminal, we arealready at capacity.” The need for an open skies agreementwithin Latin America is another challenge. “Panamá has beensuccessful at negotiating some open skies agreements,” saysHeilbron, “But the lack of a region-wide agreement really holdsback growth; not just for Copa, but for other airlines, as well.”Heilbron thinks a Latin American open skies agreement wouldbe good for airlines and good for customers, but comments thatoften governments forget about the customers.

The immediate priority for Copa is to increase frequenciesin currently served markets. To do this, the airline is busy taking

COPA Captain Toti Rios with two flight attendants at the oldTocumén Airport.

FRA

NZ

MA

NFR

EDI

COPA received its first Boeing 737 (a -100) in 1980. This is one of its Dash 200s.

GA

RY JE

NN

ING

S

16 April 2003

delivery of new aircraft. At the end of 2002, theairline had 20 aircraft in its fleet, comprising 12Boeing 737-700s and eight 737-200s. Copa alsohas six firm orders and six options for 737NGs,with the first two deliveries of 2003 scheduled tobe 737-800s. The Dash 200s will be phased outby 2005.

Like spokes radiating from the center ofa bicycle wheel, Copa currently serves 27destinations in 19 countries. From Los Angelesto Buenos Aires, the airline flies throughout theAmericas and the Caribbean. Copa’s routenetwork is as varied as the cities it serves. Fromshort hops to Costa Rica and Colombia, to someof the longest scheduled 737 services in theworldæ Panamá to Buenos Aires (a sector time ofjust over seven hours), São Paulo, Santiago, andLos Angeles.

Because of its long routes, coupled with‘hot-and-high’ airports, Copa was the secondairline in the world, after Kenya Airways, toinstall Aviation Partners Boeing blendedwinglets on its 737-700s. The winglet-equippedaircraft are more fuel-efficient, carry a biggerpayload, and have reduced engine maintenancecosts (Airways, April 2001). “We have been verysatisfied with the winglets,” says Heilbron. “Itmakes sense for the routes we serve. We’ve seena four percent improvement on fuel burn, andwe are in the process of retrofitting previousdeliveries of the 700 with the winglets.” Whilewinglets are factory options for the 737-800,Boeing will not install them on the -700s,so Copa sends its aircraft to Cascade Aerospacein Abbotsford, British Columbia, for themodification.

Copa Airlines has a diverse workforce. Tenpercent of the company’s pilots are LatinAmerican expatriates and, ironically under aprotectionist piece of Panamanian legislation,they must all be captains. The airline also hassome expat executives. “It’s difficult for smallcountries to have local talent,” remarksHei lbron. “Besides , aviat ion is a g lobalbusiness…we compete against the best airlinesin the world, so we must recruit the best peopleto work for us.”

Captain Larry Ganse, Copa’s vice presidentof operations, is a good example. Ganse, whospent 27 years with TWA, and subsequently timewith Northwest Airlines and Grupo TACA beforeCopa, is currently qualified on the 737-700, andusually flies a scheduled route three times amonth. He says that leaving the office for theflightdeck is his reality check. Generally, expatsare graciously accepted at Copa. “Panamá is avery cosmopolitan place, and is amazinglytolerant,” he enthuses.

The slump in the global airline industry,following the events of September 11, 2001, didnot affect Copa as much as it did others. “Wehave done well despite the downturn,” assertsHeilbron, as he knocks on a wooden table. “Itreally only affected us for a few months. The USroutes are still slow, but they account for only 25percent of our market share. Other routes havereturned to normal.” Heilbron adds that Latin

America is very diverse, pointing out that last year South America was strongand Central America was weak. This year, it is the opposite. “The countries ofLatin America are never doing well at the same time,” he observes, “but thatalso means that they are never doing poorly at the same time.” And while manyairlines were scrambling to implement tougher security measures, Copa, as withmost Latin American airlines, was already spending more on security, becauseof its proximity to the drug trade. The airline was also quick to install steelreinforced cockpit doors on all its aircraft in the latter part of 2001.

Nevertheless, it has not been all smooth flying for Copa Airlines. In March2001, the FAA downgraded Panamá’s rating in its International Aviation SafetyAssessment program to Category 2, or failure to comply with ICAO(International Civil Aviation Organization) standards. The ruling limits UScarriers from code-sharing with a Panamanian airline. Hence, Continental’scodes have been removed from Copa’s flights. “This has definitely affected us,”concedes Heilbron. “Revenues are being lost.” Heilbron says that thePanamanian government is working hard and making progress to restore thecountry to Category 1 status. “I support the FAA’s decision. The assessmentwas correct, but it is unfair to penalize airlines for what really should be agovernment issue.”

Copa has witnessed many changes over the past three years, but itsoperational performance is especially noteworthy. In 2000, the airline’s on-timeperformance was 65%, and schedule completion was around 96%. Today, thosefigures are above 90% and 99%, respectively. “I was hired to try and fix this,”admits Capt Larry Ganse, with a sense of pride. “The biggest problem was the

Los Angeles

Orlando

Newark

Buenos Aires

Santiago

Lima

São Paulo

Caracas

Quito

Bogotá

Cali

Medellin

Managua

Mexico City

Miami

Houston

Cancún

Cartagena

Port-au-Prince Santo Domingo

San Juan

BarranquillaGuatemala

Panama

San Salvador

San Jose

Havana

Montego Bay

Kingston

Copa Airlines operates four of the longest-scheduled 737 routes in the world, from PanamaCity to Buenos Aires, Santiago, São Paulo, and Los Angeles.

ILLU

STR

ATIO

N B

Y G

REG

SM

ITH

lack of a proper schedule. There was no systematic tracking andvalidation of block times.” Ganse also notes that the scheduleswere adjusted to realistically accommodate air traffic control inPanamá. “There is no doubt that the Continental connectionhas helped,” Ganse says, “Tom Chappelle, who is on loan fromContinental, has done miracles with the airline’s logistics andspare parts provisioning, which contributes to a much higherdispatch reliability on the maintenance side.”

Ganse observes that Copa is developing a new attitude.“There is something called la hora Panamania [Panamaniantime]. “People thought that it was okay to show up for a 12o’clock meeting at 1215 or 1230…we’ve had to work to changethat, but it’s been easier to do than I thought.” Copa now has anemployee who is responsible for internal communications,and Ganse points out the bulletin boards that have beenplaced liberally through work areas that reinforce the airline’spositive results.

As most in the airline industry will attest, no two days arealike. While Ganse shows us Copa’s operations center, he isbriefed on the effects of El Reventador, the volcano that iserupting near Quito, Ecuador. Ash has caused minor damage toa 737 en route to Buenos Aires. Like afather concerned for an ill child, Ganseasks when the maintenance team willarrive in the Argentine capital. In thepilot’s briefing room, someone analyzes alarge map that is hanging on the wall.One coloured line shows the usual flightpath for aircraft flying between Panamáand Lima, Perú. Another shows the flightdeviation to avoid the volcano. Ganseexplains that the deviation will addabout 20 minutes to the flight time, buthe expresses confidence that the Limastation will be able to turn the aircraftaround on schedule.

Fundamentally, Copa is committedand focused on passenger traffic, but itsrevenues are supplemented by a modestoperation at Tocumén Cargo Terminal, awholly owned subsidiary, which Copaestablished to manage its freightbusiness. The aim is to take advantage ofother airlines’ traffic, and the high-security installation handles cargo for FedEx, Iberia, andContinental. Copa also has an agreement with AerosucreColombia to wet-lease, for 150 hours a month, oneof its former 737-200Cs.

Copa’s maintenance hangar can accommodatetwo Boeing 737s—well, sort of. The airline isworking with the airport to extend the building,which would ensure that if two aircraft were in thehangar, both would be covered. At present, the tailof one aircraft juts out. The airline performs Achecks at Panamá, while C checks on the -200s areconducted by Varig, at Pôrto Alegre in Brazil.Copa still has to decide where the C checks on its-700s will be performed, when they become duein 2004.

Meanwhile, Copa is committed to increasingthe skills of its employees, and Panamanians ingeneral. To this end, the airline is working withthe Universidad Tecnológica de Panamá todevelop degree programs in engineering andtransport studies. “Our continued successdepends on training local talent,” explainsGanse. Technical English courses have been

offered to the airline’s maintenance staff. Part of Copa’s success lies in its ability to be resourceful.

Whether it is trying to secure unused buildings from the airport,or constructing its own simulators, the airline finds creativeapproaches to its operations. “We got our cockpit procedurestraining simulator from Continental, and then built thepassenger cabin ourselves,” says Ganse. “We could have easilyspent more than a million dollars on a brand new one, but thisone only cost us about $20,000. It might not have all the bellsand smoke, but it gives the pilots, and cabin crew, a fairlyrealistic environment to work in.”

On the hangar floor, as we walk under one of the airline’s737s, Ganse points to the red tape that covers every possibleopening which might be a place to hide contraband. “So far wehaven’t had a problem with drugs being found on our aircraft,”he reveals, “but it is something we take very seriously.” As thefirst of the two 737s is pushed out of the hangar, Ganse isassured by the maintenance supervisor that both aircraft will beflying that evening.

Tocumén has two satellites, one equipped with sevenairbridges and the other with six. The main terminal, which

17

Copa’s maintenance hanger.

Friendly staff man Copa’s check-in counter.

PHO

TOS:

CO

RR

IE D

ON

OH

UE

18 April 2003

connects the two satellites, has space for four aircraft, two ofthem on remote stands. The hub is a source of great pride forCopa. “We have created such an efficient operation, which is abig part of our success,” comments Ganse. “Most of our traffic isconnecting, so we have a maximum connect time of an hour,and a minimum connect time of 30 minutes. Copa contracts itscatering to LSG Sky Chefs (Airways, June 1998). But it operatesits own catering trucks, which Ganse says is more efficient andsaves money. Tocumén has some advantages, being one of thefew airports in Latin America that has two parallel runways,

which can easily handle increased traffic. And it enjoys greatweatheræit is closed for less than an hour each year.

During the airline’s two peak periodsæDecember/Januaryand July/August—college students are hired to help direct andmove connecting passengers. The students wear bright redT-shirts, and are paid a small wage and given a free ticket onCopa’s system. This program has been a big success and, unlikein some parts of the world, the airline’s unions so far havenot objected.

Ganse often comes to the airport’s President’s Club Lounge,

Aerial view of TocumenAirport and (above) the mainterminal building.

PHO

TOS:

TH

OM

AS

D M

AYES

Jr

Copa Airlines now has one of the youngest fleets in Latin America and is the largest Boeing 737NG in the region.

19

where he proudly oversees the airport’s operations. Staffaffectionately refer to one area as ‘Larry’s Office’, but on thisnight someone is sitting in his favorite spot. As the dark ofevening settles over Panamá, the lights of incoming aircraft canbe seen in the distance, lining up for final approach. As a CopaAirlines 737 touches down, Ganse says with pride, “Copa is agood airline, but we have all the pieces to be a great airline.”

Fast Facts

Copa Airlines(Compañía Panameña de Aviación)

IATA: CM ICAO: CMP IATA/ARC: 230 RADIO: Copa

Ave Justo Arosemena y Calle 39 Tel: +507 227 2522Apartado, Postal 1572 Fax: +507 227 1952Panamá 1, Res: 1 800 359 2672 (US)Panamá PR: +1 507 227 0116

Email: cserv@mail.copa.com.paWebsite: www.copaair.com

Cities served: Central America: Guatemala City, San Salvador, Managua,San José, Panama City North America: Cancún, Los Angeles, Mexico City,Miami, Orlando Caribbean: La Habana [Havana], Kingston, Puerto Principe,San Juan, Santo Domingo South America: Barranquilla, Bogotá, BuenosAires, Cali, Caracas, Cartagena, Guayaquil, Lima, Medellín, Quito, Santiago,São Paulo

FFP: Continental OnePassTraffic: (estimated 2002) Passengers: 1.1 million

Founded: August 30, 1944Start date: May 5, 1947Chairman: Alberto C MottaCEO: Pedro HeilbronEmployees: 2,300Ownership: Motta Internacional (51%), Continental Airlines (49%)

FleetType No Seats EnginesBoeing 737-200 8 C8Y106 PW JT8D-15Boeing 737-700 12 C12Y112 CFM56-7B24

On order737-700 4 (+4 options)

2 (+2 options) (C14Y141)delivery from October 2003

TH

OM

AS

D M

AYES

JrG

IAN

FRA

NC

O B

ETIN

G