Copa Holdings, S.A. (Copa) is a Latin American provider of airline passenger and cargo service through the company’s two principal operating subsidiaries, Copa Airlines and AeroRepública.
Copa Airlines operates from its strategically located position in the Republic of Panama, and AeroRepública operates a business model, Wingo, within Colombia and various cities in the region. As of December 31, 2023, the company operated a fleet of 106 aircraft, 76 Boeing 737-Next Generation aircraft, 29 Boein...
Copa Holdings, S.A. (Copa) is a Latin American provider of airline passenger and cargo service through the company’s two principal operating subsidiaries, Copa Airlines and AeroRepública.
Copa Airlines operates from its strategically located position in the Republic of Panama, and AeroRepública operates a business model, Wingo, within Colombia and various cities in the region. As of December 31, 2023, the company operated a fleet of 106 aircraft, 76 Boeing 737-Next Generation aircraft, 29 Boeing 737 MAX 9 aircraft and one Boeing 737-800 BCF (Boeing Converted Freighter). As of December 31, 2023, the company had one purchase contract with Boeing entailing 57 firm orders of Boeing 737 MAX aircraft. These aircraft are scheduled for delivery between 2024 and 2028.
Copa offers approximately 375 daily scheduled flights among 82 destinations in 32 countries in North, Central and South America and the Caribbean from its Panama City hub. Copa provides passengers with access to flights to more than 180 other destinations through code-share arrangements with UAL and other airlines, pursuant to which each airline places its name and flight designation code on the other’s flights. Through its Panama City hub, Copa is able to consolidate passenger traffic from multiple points to serve each destination effectively.
Copa has a strategic alliance with United Airlines, or ‘UAL’ or ‘United,’ that encompasses joint marketing strategies and code-sharing arrangements, among other things. The company has been a member of Star Alliance since June 2012.
Strategy
The key elements of the company’s business strategy are to expand its network by increasing frequencies and adding new destinations; increase direct sales as well as improving efficiency through technology and automated processes; and emphasize superior service and value to the company’s customers.
Route Network and Schedules
As of December 31, 2023, Copa provided regularly scheduled flights to 82 cities in North, Central and South America and the Caribbean. The majority of Copa flights operate through the company’s hub in Panama City which allows the company to transport passengers and cargo among a large number of destinations with service that is more frequent than if each route were served directly.
The company’s hub-and-spoke model is the most efficient way for the company to operate its business since most of the origination/destination city pairs the company serves do not generate sufficient traffic to justify point-to-point service. Also, since the company serves many countries, it would be very difficult to obtain the bilateral route rights necessary to operate a competitive network-wide point-to-point system.
Copa schedules its hub flights using a ‘connecting bank’ structure, where flights arrive at the hub at approximately the same time and depart a short time later. In June 2011, the company increased its banks of flights from four to six a day. This allowed the company to increase efficiency in the use of hub infrastructure in addition to providing more time-of-day choices to passengers.
In addition to increasing the frequencies to destinations the company already serves, Copa’s business strategy is also focused on adding new destinations across Latin America, the Caribbean, and North America in order to increase the attractiveness of the company’s Hub of the Americas at Tocumen International Airport for intra-American traffic. The company plans to introduce new destinations and to increase frequencies to many of the destinations that Copa serves. The company’s fleet allows the company to improve its service by increasing frequencies and service to new destinations with the right-sized aircraft.
As a part of the company’s strategic relationship with UAL, Copa provides flights through code-sharing arrangements to over 120 other destinations. In addition to codeshares provided with the company’s Star Alliance partners, Copa also has code-sharing arrangements in place with several other carriers, including Air France, KLM, Iberia, Air Europa, Emirates, Gol, Azul and Cubana.
In December 2016, the company launched a business model, Wingo, to diversify the company’s offerings and to better compete with other carriers in the markets. Wingo serves domestic flights in Colombia and some international cities to and from Colombia. In 2021, the company incorporated a new Wingo operator based in Panama, La Nueva Aerolínea, S.A., and in 2023, the company started operating one 737-800 aircraft.
Airline Operations
Passenger Operations
Leisure traffic, which makes up close to half of Copa’s total traffic, tends to coincide with holidays, school vacations and cultural events and peaks in July and August, and again in December and January. Approximately one third of Copa’s passengers regard Panama City as their destination or origination point, and most of the remaining passengers pass through Panama City in transit to other points on the company’s route network.
Cargo Operations
In addition to the company’s passenger service, the company makes efficient use of extra capacity in the belly of its aircraft by carrying cargo. The company’s cargo operations principally consist of freight service. The company primarily moves its cargo in the belly of the company’s aircraft; however, the company also wet-leases and charters freighter capacity when necessary to meet the company’s cargo customers’ needs.
Relationship with UAL
In May 1998, Copa Airlines and Continental Airlines entered into a comprehensive alliance agreement to offer a more complete and seamless travel experience to passengers. The agreement encompassed a broad array of activities, including Copa’s participation in Continental’s frequent flyer programs and VIP lounges, codesharing, other joint business activities, as well as trademark agreements. Continental became a subsidiary of UAL after its merger with United Airlines in 2010, and UAL has continued its longstanding cooperation with Copa Airlines through a series of renewed agreements.
As a result of the company’s alliance, the company has benefited from Continental’s and UAL’s expertise and experience over the years. For example, prior to July 2015 when the company launched its own frequent flyer program, ConnectMiles, the company adopted Continental’s OnePass (now UAL’s MileagePlus) frequent flyer program and rolled out a co-branded joint product in most of Latin America, which enabled Copa to develop brand loyalty among travelers. The co-branding of the OnePass (now MileagePlus) loyalty program helped Copa to leverage the brand recognition that Continental already enjoyed across Latin America and has enabled Copa to compete more effectively against regional airlines. The company also has adopted several important information technology systems, such as the SHARES computer reservation system in an effort to maintain commonality with UAL.
The company’s alliance relationship with UAL enjoys a grant of antitrust immunity from the U.S. Department of Transportation, or ‘DOT’. The alliance agreement expires in 2026 and is terminable by either airline in cases of, among other things, uncured material breaches of the alliance agreement, bankruptcy, termination of the services agreement for breach, termination of the frequent flyer participation agreement without entering into a successor agreement, certain competitive activities, certain changes of control of either of the parties and certain significant operational service failures.
Trademark License Agreement. Under the company’s trademark license agreement with UAL, the company has the right to use a logo incorporating a design that is similar to the design of the UAL logo. The company also has the right to use UAL’s trade dress, aircraft livery and certain other UAL marks under the agreement that allow the company to more closely align the company’s overall product with the company’s strategic alliance partner. The trademark license agreement is coterminous with the alliance agreement and can also be terminated for breach. In most cases, the company has a period of five years after termination to cease to use the marks on the company’s aircraft, with less time provided for signage and other uses of the marks or in cases where the agreement is terminated for a breach by the company.
Sales, Marketing and Distribution
Sales and Distribution. A portion of the company’s sales were completed through travel agents, including OTAs and other airlines while the rest came from direct sales via the company’s city ticket offices, or ‘CTOs,’ call centers, airport counters or website. In recent years, travel agents’ base commissions have decreased significantly in most markets as more efficient back-end incentive programs have been implemented to reward selected travel agencies that exceed their sales targets.
Travel agents may obtain airline travel information and issue airline tickets through a direct connection program that the company launched on September 1, 2022 using the New Distribution Capability (NDC) Level 4 standard or through the traditional GDSs that enable them to make reservations on flights from a large number of airlines. GDSs are also used by travel agents to make hotel and car rental reservations. Copa participates actively in major international GDSs, including SABRE, Amadeus and Travelport. In return for access to these GDS systems, Copa pays transaction fees that are generally based on the number of segments booked through each system and a portion of these transaction fees are now passed on to the passenger in the form of a distribution cost recovery surcharge.
Copa has a sales and marketing network consisting of 30 ticket offices, including city ticket offices located in Panama, Colombia and other countries, in addition to the airports where the company operates.
In September 2022, Copa implemented a channel differentiation strategy (‘Copa Connect’) with the objective of shifting sales to more cost-efficient channels. This strategy adds a distribution surcharge to the fare for tickets purchased through the traditional travel agency GDS channel (known as EDIFACT) in order to partially offset the higher cost of this channel. For travel agencies, and their customers, who want to avoid the GDS distribution surcharge, the company has offered alternatives leveraging the IATA ‘New Distribution Capability’ (NDC) standard.
Advertising and Promotional Activities. In recent years, the company has increased its use of digital marketing, including social media via Facebook, Instagram and Twitter to enhance the company’s brand image and engage customers in a new way. Although the majority of the company’s efforts are focused on digital channels, the company’s advertising and promotional activities also include the use of television, print, radio and billboards, as well as targeted public relation events in the cities where the company flies. The corporate traveler is an important part of the company’s business, and the company particularly promotes its service to these customers by conveying the reliability, convenience and consistency of the company’s service and offering value-added services, such as convention and conference travel arrangements. The company also promotes package deals for the destinations where the company flies through combined efforts with selected hotels and travel agencies.
Competition
Copa competes with a number of other airlines that serve the routes on which the company operates, including Avianca, American Airlines, Delta Air Lines, Spirit, JetBlue, Azul, Aeromexico, Gol, Volaris, Viva Air and LATAM, among others.
Aircraft
As of December 31, 2023, Copa operates a fleet consisting of 106 aircraft. As of December 31, 2023, Copa has firm orders to purchase 57 Boeing 737 MAX aircraft to be delivered between 2024 and 2028. In October 2018, Copa signed an aircraft sale and purchase agreement with Azorra Aviation for the sale of five Embraer 190 aircraft in 2019. In 2020, the company signed an aircraft sale and purchase agreement for the remaining Embraer 190 aircraft and announced the sale of the B737-700 fleet. In 2021, the company completed the sales of the Embraer 190 aircraft and the three B737-700 aircraft. Due to an increase in demand in the region, the Board of Directors approved continuing to operate the remaining nine Boeing 737-700 aircraft for a period of three years. During 2022, the company sold two B737-700 airframes that were under a lease agreement to a third party.
Following the company’s strategy, as of December 31, 2023, the company has firm orders to purchase 57 Boeing 737 MAX aircraft to be delivered between 2024 and 2028. The 737 MAX provides additional benefits to the current fleet such as fuel efficiency, longer range and additional capacity compared to the current Copa seat configuration. Following the Ethiopian Airlines accident involving a Boeing 737 MAX 8 aircraft, the company suspended operations of its six Boeing 737 MAX 9 aircraft as regulatory authorities around the world grounded the aircraft. On November 18, 2020 the FAA rescinded its grounding order, issued an airworthiness directive, and published training requirements enabling the company to begin modifying certain operating procedures, implementing enhanced pilot training requirements, installing FAA-approved flight control software updates, and completing other required maintenance tasks specific to the MAX aircraft. On January 2021, the company resumed operations of its Boeing 737 MAX fleet after the authorization of the Autoridad Aeronáutica Civil de Panama. On January 6, 2024, following the Airworthiness Directive issued by the FAA, the company suspended operations of 21 Boeing 737 MAX 9 aircraft. From January 6 to January 29, 2024, a total of 1,788 flights were cancelled. After undergoing the technical inspections required by regulators, most of these aircraft have returned to the company’s flight schedule.
Through several special purpose vehicles, the company has beneficial ownership of 75 of its aircraft. In addition, the company lease 31 of its aircraft under long-term lease agreements that have an average remaining term of 3.8 years.
The company is responsible for the maintenance, servicing, insurance, repair and overhaul of the aircraft during the term of the lease.
To better serve the company’s business travelers, the company offers a business class (Clase Ejecutiva) configuration in the company’s fleet. The company’s business class service features upgraded meal service, special check-in desks, bonus mileage for full-fare business class passengers and access to VIP lounges. The company’s Boeing 737-800 aircraft have three different configurations: one with 16 business class seats with 38-inch pitch and a total of 160 seats, a second with 16 business class seats with 48-inch pitch seats and a total of 154 seats and a third with 16 business class seats and a total of 166 seats. The company’s Boeing 737 MAX 9 aircraft feature two configurations: one with 16 full lie-flat seats in business class (Dreams) and a total of 166 seats and another configuration with twelve full lie-flat seats in business class (Dreams) and a total of 174 seats. The company’s Boeing 737-700 aircraft have 12 business class seats and a total of 124 and 126 seats.
Also, within the Copa Holdings fleet, there are nine 737-800s dedicated to the operations of Wingo. These aircraft are equipped with 186 economy class seats.
Each of the company’s Boeing 737-Next Generation aircraft is powered by two CFM International Model CFM 56-7B engines. The company’s Boeing 737 MAX 9 aircraft are powered by two CFM International Leap 1B engines. The company has twelve spare engines for service replacements and for periodic rotation through the company’s fleet.
Maintenance
The maintenance performed on the company’s aircraft can be divided into two general categories: line and heavy maintenance. Line maintenance consists of routine, scheduled maintenance checks on the company’s aircraft, including pre-flight, service visits, ‘A-checks’ and any diagnostics and routine repairs. Copa’s line maintenance is performed by Copa’s own technicians at the company’s main base in Panama and/or at the out stations by Copa Airlines and/or AeroRepública employees or third-party contractors. Heavy maintenance consists of more complex inspections and overhauls, including ‘C-checks,’ and servicing of the aircraft that cannot be accomplished during an overnight visit. Maintenance checks are performed intermittently as determined by the aircraft manufacturer through Copa Airlines AAC approved maintenance program. These checks are based on the number of hours, departures or calendar months flown. Historically the company had contracted with certified outside maintenance providers, such as COOPESA. In October of 2010, Copa decided to begin performing a portion of the heavy maintenance work in-house. The hiring, training, facility and tooling setup, as well as enhancing certain support shops, were completed during a ten-month period. Ultimately, Copa acquired the required certifications by the local authorities to perform the first in-house C-Check in August 2011, followed by its second C-check in October of the same year. The company is performing a continuous line of C-Checks in-house for the entire year, and on January 20, 2017 the company held the ground-breaking of the company’s new maintenance facility at Tocumen International Airport which allows the company to perform up to three complete continuous lines of C-checks, as required. The new facility commenced operations in January 2019. In 2023, 17 heavy maintenance checks were successfully performed in-house. When possible, Copa attempts to schedule heavy maintenance during its lower-demand seasons in order to maximize productive use of its aircraft.
Copa has exclusive long-term contracts with GE Engines whereby they perform maintenance on all of the company’s CFM-56 engines.
In October of 2014, Copa Airlines established its own maintenance technician training academy. Through this program, the company recruit and train technicians through on-the-job training and formal classes. These future technicians stay in the program for four years total. After the first two years, each trainee receives their airframe license and becomes a mechanic. After the next two years, each trainee receives their power plant license and is released as a mechanic into the company’s work force.
Copa Airlines and AeroRepública employ, system-wide, around 679 maintenance professionals, who perform maintenance in accordance with maintenance programs that are established by the manufacturers and approved and certified by international aviation authorities. Every mechanic is trained in factory procedures and goes through the company’s own rigorous in-house training program. Every mechanic is licensed by the AAC and approximately 24 of the company’s mechanics are also licensed by the FAA. The company’s safety and maintenance procedures are reviewed and periodically audited by the AAC (Panama), UAEAC (Colombia), the FAA (United States), IATA (IOSA), and to a lesser extent, every foreign country to which the company fly. Copa Airlines’ maintenance facility at Tocumen International Airport has been certified by the FAA as an approved repair station, under FAR Part 145, and once a year the FAA inspects this facility to validate and renew the certification. Copa’s aircraft are initially covered by warranties that have a term of four years, resulting in lower maintenance expenses during the period of coverage. All of Copa Airlines’ and AeroRepública’s mechanics are trained to perform line maintenance on each of the Boeing 737-Next Generation and Boeing 737 MAX.
All of AeroRepública’s’s maintenance and safety procedures are certified by the Aeronáutica Civil of Colombia and Bureau Veritas Quality International (‘BVQI’), the institute that issues International Organization for Standardization, or ‘ISO,’ quality certificates. All of AeroRepública’s maintenance personnel are licensed by the
Aeronáutica Civil of Colombia. In December 2017, AeroRepública received its IATA Operational Safety Audit, or ‘IOSA,’ compliance certification, which will remain valid until December 2024.
Airport Facilities
The company’s hub at Panama City’s Tocumen International Airport (PTY) is an excellent base of operations for the following reasons:
Panama’s consistently temperate climate is ideal for airport operations.
Tocumen International Airport is the only airport in Central America with two operational runways. Also, unlike some other regional airports, consistent modernization and growth of the company’s hub has kept pace with the company’s needs. In 2012, Tocumen International Airport completed Phase II of an expansion project of the existing terminal. In 2013, Tocumen International Airport awarded the bid for the construction of a new terminal (‘Terminal 2’ or ‘T2’), with an additional 20 gates and eight remote positions. Terminal 2 started operating a few gates during the early part of 2019. On June 22, 2022, the company moved its ticket counter and baggage claim operations to Terminal 2 and began using 20 fully equipped gates in this new terminal. The company also opened a new Copa Club, spanning 20,720 square feet, in the new Terminal. The transition between terminals did not impact the company’s operations.
Panama’s central and sea level location provides a very efficient base to operate the company’s narrow body fleet, efficiently serving short and long-haul destinations in Central, North and South America, as well as the Caribbean.
Tocumen International Airport is operated by an independent corporate entity established by the government, where stakeholders have a say in the operation and development of the airport. The law that created this entity also provided for a significant portion of revenues generated at Tocumen International Airport to be used for airport expansion and improvements. None of the airlines operating at Tocumen International Airport have any formal, written agreements with the airport management to govern access fees, landing rights or allocation of terminal gates. The company relies upon its good working relationship with the airport’s management and the Panamanian government to ensure that the company has access to the airport resources the company need at prices that are reasonable.
The company provides most of its own ground services and handling of passengers and cargo at Tocumen International Airport. In addition, the company provides services to several of the main foreign airlines that operate at Tocumen International Airport. In most of the other airports where the company operates, airport support services are provided by external third parties.
The company uses a variety of facilities at Tocumen International Airport, including the company’s maintenance hangars and its operations facilities in the airport terminal. In January 2019, the company opened a new hangar next to its existing maintenance facility. This new hangar has an area of approximately 90,000 square feet and can accommodate up to three narrow body aircraft simultaneously.
The company’s Gold and higher PreferMember passengers have access to two Copa Clubs at the Tocumen International Airport in Panama, one located in Terminal 1 and the second located in Terminal 2. These passengers also have access to other Copa Clubs in the region, which are strategically located in San Jose, Guatemala City, Santo Domingo and Bogotá.
Environmental
The company maintains an Environmental Management and Adequacy Program (‘PAMA’), in all the company’s facilities located in Panama, including the company’s maintenance hangar and support facilities at the Tocumen International Airport, Administrative Offices in Costa del Este and Training Center in Clayton. This program was approved by the Panamanian National Environmental Authority (‘ANAM’) in 2013, governmental entity now named Ministry of Environment (‘MiAmbiente’), and includes actions such as a recycling program, better use of natural resources and final disposition of the unfiltered water used for aircraft maintenance, among many others. The Copa Tocumen International Airport’s PAMA final report is presented to MiAmbiente on an annual basis to monitor and report the company’s environmental follow-up assessments. Copa Airlines is an active signatory company of the Global Compact of the United Nations with its local chapter of the Global Compact Network Panama, and have, thus, published the company’s Communication on Progress (‘COP’) since October 2001. This Global Compact agreement requires the company to implement measures like maintaining a young fleet, incorporating new navigation technologies such as RNAV to reduce fuel consumption, installing latest generation winglets and scimitars in the company’s planes to reduce fuel consumption and recycling, among many others.
Starting in 2019, Copa is reporting the fuel consumption burned during its annual flight operations and its gas emissions to the AAC. As a result, Copa is in line with the global aviation effort led by ICAO, Colombia, and Panama Civil Aviation Authorities with the implementation of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). The first gas emissions report corresponding to 2019 operations was successfully delivered to the AAC on October 2020, after passing the audit by the company’s external Verification Body of greenhouse gas emissions accredited by ICAO. The Gas Emissions Report (ER) corresponding to 2022 operations was delivered to the AAC on May 2023.
Regulation
The Air Transportation Certificate specifies the routes, equipment used, capacity, and frequency of flights. This certificate must be updated every time Copa acquires new aircraft, or when routes and frequencies to a particular destination are modified.
Panamanian law also requires that the aircraft operated by Copa Airlines be registered with the Panamanian National Aviation Registrar kept by the AAC, and that the AAC certifies the airworthiness of each aircraft in the fleet.
The most significant restriction on the company imposed by the Panamanian Aviation Act, as amended and interpreted to date, is that Panamanian nationals must exercise ‘effective control’ over the operations of the airline and must maintain ‘substantial ownership’.
Operations to the United States by non-U.S. airlines, such as Copa Airlines, are subject to Title 49 of the U.S. Code, under which the DOT, the FAA and the TSA exercise regulatory authority.
Copa Airlines’ operations in the United States are also subject to regulation by the FAA with respect to aviation safety matters, including aircraft maintenance and operations, equipment, aircraft noise, ground facilities, dispatch, communications, personnel, training, weather observation, air traffic control and other matters affecting air safety.
Two U.S. airports at which the company operates, O’Hare International Airport in Chicago (O’Hare) and John F. Kennedy International Airport in New York, or ‘JFK’, were formerly designated by the FAA as ‘high density’ traffic airports subject to arrival and departure slot restrictions during certain periods of the day.
Under the Airport Noise and Capacity Act of 1990 and related FAA regulations, aircraft that fly to the United States must comply with certain Stage 3 noise restrictions, which are the most stringent FAA operating noise requirements. All of the company’s Copa aircraft meet the Stage 3 requirement.
History
Copa Holdings, S.A. was founded in 1947. The company was incorporated in 1988.
