In the News from Panama

Why is Copa Airlines’ Stock Soaring?

Copa Airlines’ stock price is up 18 percent in 2017, thanks to a “combination of Latin America’s burgeoning airline economics and a first-class hub,” according to a new analysis from The Street. Copa recently reported a 10.7 percent revenue increase in the fourth quarter, which pushed the stock up 6 percent in one day, The Street reports.

Copa is turning into a real Panama success story, which has attracted the attention of investors. The airline has been rapidly expanding its routes, fueling an expansion of Tocumen International Airport and making it easier for international corporations to do business here.

In many ways, Panama City is officially becoming the air transportation center for Latin America. In addition to expansion of Tocumen, the International Air Transport Association (IATA) recently opened an office in Panama City, in recognition of the city’s key role in the area.

Copa’s success  is also evidence of the growth of air traffic around the region, The Street notes. The big three international U.S. carriers—American, United and Delta—posted revenue gains in Latin America of between 5.2 percent and 10.3 percent in the fourth quarter.

At a recent conference, Delta CFO Paul Jacobson called Latin America “the shining star in the network.”

The airline’s fortunes are directly tied to the Latin American economy and interest in the region from around the world.

“Latin America is coming back after two really hard years,” Copa CEO Pedro Heilbron told The Street. Brazil’s lagging economy has weighed on the market, as well as currency devaluations. “Latin American seems to be coming out of that, but we are still very careful,” Heilbron said said.

Brazil’s economy is showing signs of life, which has some analysts bullish on the sector. “The LatAm region is emerging from a recession which could provide further upside earnings,” Deutsche Bank analyst Mike Linenberg told The Street. Copa’s growth should continue in 2017, he predicts.

Heilbron said Copa’s capacity grew only two percent last year, despite the revenue spurt. “This year we are guiding to 6 percent growth,” but that will primarily come from aircraft utilization and “putting back some frequencies, not adding aircraft,” he said.

“We’re in a very good position to take advantage” of regional growth, Heilbron told The Street. “There will always be competition, but our centrally located hub gives us a unique advantage.”

Read the full report here.