Evaluating drivers of profitability for airlines in Latin America: A case study of Copa Airlines

John F. O'Connell, Raquel Martinez Avellana, David Warnock-Smith and Marina Efthymiou

Journal of Air Transport Management, 2020, vol. 84, issue C

Abstract: Air Traffic demand in Latin America is expected to double over the next twenty years, yet airline profitability in the region remains highly problematic. The impediments challenging financial prosperity in the continent are numerous and have resulted in prolonged loss-making periods across most Latin American carriers. Breaking with this trend, Copa Airlines has been able to report double-digit net results for several years and recorded 56% of total profits earned by all Latin American carriers in 2016. This research has identified a number of Key Performance Indicators that have underpinned Copa Airlines' financial prosperity through a Product and Organisational Architecture (POA) framework analysis whose results were validated and elaborated upon by the CEO of Copa Airlines. Copa's sustained financial success was attributable to a number of factors. First, its geographical positioning has allowed it to engineer strong connectivity by coupling North and South America through its hub, which is reachable with narrowbodies to nearly all points in the Americas. Second, its low unit cost structure is akin to that of LCCs, operating a single aircraft type with high utilisation. Third, it has a uniquely low market concentration of competitors on its routes and capitalises on this by having a strong schedule with high frequencies together with outstanding punctuality. Fourth, it has a synergistic and fruitful cooperation with its hub airport at Tocumen. Finally it benefits from positive external factors such as a dollarized home economy with high GDP growth, exceptionally low unemployment and inflation rates ring-fenced with security. These pillars can be used as a reference for other Latin based airlines seeking to improve profitability.

Keywords: Latin America; Product and organisational architecture; Copa airlines; Profitability; Panama (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0969699718301510
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:84:y:2020:i:c:s0969699718301510

DOI: 10.1016/j.jairtraman.2019.101727

Access Statistics for this article

Journal of Air Transport Management is currently edited by Anne Graham

More articles in Journal of Air Transport Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().