Aero Republica to launch Mexico and Cuba services

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Aero Republica plans to launch services to Mexico and Cuba in October as the Colombian carrier focuses on international growth and puts the brakes on domestic expansion due to intense low-fare competition.

The Copa Airlines subsidiary says it will operate one daily 737-700 flight on the Bogota-Mexico City route from 2 October. Aero Republica currently operates a fleet of 15 Embraer E-190s but has been looking since early this year at taking two 737s from parent Copa to support its international expansion plan.

Aero Republica will initially serve the Bogota-Havana route once per week on Saturdays, also from 2 October. It is unclear which aircraft type will be used on this route but it will likely be E-190s.

Until late last year, Aero Republica only operated domestically and to two international destinations - Caracas in Venezuela and Copa's Panama City hub. But the Bogota-based carrier launched service to Quito in December and added a second destination in Ecuador, Guayaquil, in March.

Aero Republica says in late June it also began six weekly E-190 flights to San Jose in Costa Rica, giving it five international destinations. But unlike its other four international destinations San Jose is only served on a one-stop basis via Panama City. Aero Republica is also launching E-190 service later this month to Guatemala City via Panama City.

Aero Republica previously served San Jose and Guatemala City via a codeshare with sister carrier Copa, which already operates from Panama City to San Jose and Guatemala City. Copa and Aero Republica have an extensive codeshare arrangement and both operate services connecting the Panama City hub with several Colombian destinations.

Copa Holdings CEO Pedro Heilbron says the two carriers recently added capacity on the key Bogota and Medellin to Panama City routes. Heilbron says combined Aero Republica and Copa now operate five daily Bogota-Panama City flights and four daily Medellin-Panama City flights.

Copa Holdings says capacity growth going forward, including a projected 15% increase for the third quarter of this year and a 21% increase for the fourth quarter, will be directed to Aero Republica and Copa international flying. Heilbron says the company does not want to add any domestic capacity in Colombia at this point due to the intense competition and low yields which have resulted since Colombia's Aires launched its 737-700 low-cost operation last year.

Aero Republica's yields dropped 17% in the second quarter and the low fares pushed up the carrier's break even load factor to 83%. "The domestic market has already been thrashed. It can't get worse," Heilbron told analysts during a conference call today to discuss second quarter earnings.

Heilbron added later in the call that Aires is "covering every market and are taking yields as low as they go. We're not forecasting an improvement but we don't see it getting worse either."

He says for now Copa Holdings has decided to stop adding capacity in the Colombian domestic market. Heilbron says the company has the flexibility to also shift existing Aero Republica domestic capacity to international markets "and we'll do that if needed if that is a better outcome for Copa Holdings". But at this point it plans to keep Colombian domestic capacity steady and simply direct new capacity internationally.

He points out that domestic capacity now only represents 12% of total capacity at Copa Holdings. He says next year this figure will drop below 10% as all the additional capacity is being directed to international markets.

At the Copa unit, the carrier is not launching new routes but focussing on adding capacity in some of its highest yield markets. In June capacity was added in five markets - Guatemala City, Havana, Los Angeles, Punta Cana and Sao Paulo - and Heilbron says other markets will see capacity increases later this year.

At Aero Republica several new international point-to-point routes are being considered throughout Latin America and the Caribbean in addition to Mexico City and Havana. Mexico City and Havana will be Aero Republica's seventh and eight international destination, and the fifth and sixth served as a non-stop from Colombia.

According to the Innovata database, Aero Republica will compete against Avianca, Aeromexico and Mexicana on the Bogota-Mexico City route. Aeromexico launched its Bogota service last month, taking advantage of an expanded Colombia-Mexico bilateral which now allows two carriers from each country to operate flights between the two Latin American capitals.

According to Innovata, Bogota-Havana is now only served with one weekly flight operated by Cubana.