Cooperation with Continental Has Helped Panama's Copa Grow

PANAMA CITY, PANAMA - Continental Airlines' blue and white logo has stretched across Latin America.

In 1998, the Houston carrier bought a 49 percent stake in the small but strategically located Compañía Panameña de Aviación, or Copa Airlines.

At the time, Copa had a reputation as being a Caribbean carrier, "a little hang loose" and "kind of Third World," much like other Latin American airlines at the time, said Daniel Gunn, Copa's vice president of planning and a former

American Airlines official who was raised in Panama.

Since then, the Panama City-based airline bought Colombia's AeroRepública, began trading on the New York Stock Exchange, all while Continental reduced its ownership to 10 percent. Last year, Copa reported a 32.1 percent increase in revenue to $237.4 million and an on-time performance of 90.3 percent, according to the company's annual report.

"They're very well regarded," said John Price, president of Miami-based InfoAmericas, a research firm specializing in Latin America. "They've grown a lot under their arrangement with Continental."

Colombian couple Aleida Cardenas and Javier Zafra said they have flown Copa several times for vacations in Panama.

"It has good service," Zafra said as he checked luggage at the airline counter for a flight to Cali, Colombia.

Copa's business also grew in the wake of the 2001 terrorist attacks as the U.S. began requiring foreign passengers to take out visas if they were making connections through U.S. airports.

"You're better off taking a local airline, and now there are some quality options," Gunn said, mentioning improvements in the reputation of not only Copa, but also El Salvador's Grupo Taca, Chile's LanChile and Brazilian carrier Gol. "It made it really uncomfortable to make a transit in the U.S. If you don't have to, it's really not worth having to do."

Copa improved its image in part as a result of the code-share agreement, which lets the carriers book flights for each other. Before signing the deal, Continental had been shopping around the region for a partner and chose the airline based in the center of the Americas.

"Back in the 1990s, there was a real musical chairs game that was going on between a lot of the U.S. major carriers and a few of the European carriers with airlines in the developing world," said Tim Cassady, Continental's managing director of corporate development.

Continental helped Copa maintain its fleet, improve its on-time performance and manage its revenues. The two carriers' networks did not overlap as Copa flies to Central America, South America and the Caribbean and its only U.S. destinations are Los Angeles, Miami, New York and Orlando.

In 1999, Copa changed its logo from orange and red, helping "a blue-tailed airplane become more recognizable in the region," Gunn said.

The image of the airlines merged so much that "when you're in their corporate headquarters, you almost think you're in Continental's headquarters," said Ray Neidl, airline analyst with Calyon Securities in New York. He has a buy rating on Copa Holdings.

Now, Continental and Copa share not only ticketing offices across this bustling city but also a lounge for frequent fliers in Panama City's Tocumen International Airport. Inside this wood-paneled lounge, passengers bound for Central, South and North America speak Spanish, English and Portuguese.

Now Copa is giving a lift to another Latin American airline, AeroRepública. In 2005, Copa acquired Colombia's then-second-largest airline for an undisclosed amount.

Panama was part of Colombia until 1903, and Gunn said Colombia is considered part of Copa's "domestic market."

"There's long-standing economic and political ties between the two nations," Gunn said from the company's headquarters between the city and the international airport.

In addition to changing AeroRepública's logo to the Continental colors, Copa is replacing the airline's fleet and offering its expertise to the Colombian carrier.

"It's unlikely Copa would have had either the expertise or the willingness to do a deal like what we did in Colombia had we not had such a successful relationship with Continental," Gunn said. "The model we are applying is very, very similar."

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TIMELINE

1947

Copa Airlines is launched as a joint venture with Pan Am, offering service between three Panamanian cities.

1992

Hub operations at Panama's Tocumen Airport begin.

1998

Copa Airlines and Continental Airlines create a strategic alliance, with the Houston-based carrier buying a 49 percent stake in the Panamanian carrier.

2005

Copa Holdings acquires Colombia's second-largest airline, AeroRepública; Copa begins trading on the New York Stock Exchange, and Continental reduces its share of Copa.

2006

Continental sells more of its shares in Copa, decreasing its stake to 10 percent.

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