Copa expects Tocumen expansion to be completed in 3Q

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Panama's Copa Airlines is moving ahead with further network expansion, with at least six destinations to be added this year, although the opening of its expanded hub has been delayed by at least three months.

Copa was expected to gain access to 12 additional gates in May, when Panama City's Tocumen International airport was planning to complete an expansion project to expand the total number of gates from 22 to 34. Copa chief executive Pedro Heilbron has confirmed the project is running slightly behind schedule and is now slated for completion in the third quarter.

"It will be ready in second half of this year - August or September," Heilbron disclosed at the Raymond James 2011 Global Airline conference in New York on 3 February.

Copa, however, will not delay its plan to add two banks of flights in June. The carrier currently has four banks, having last added two banks in June 2007. Heilbron says Copa will begin operating its fifth and sixth Panama City bank on 15 June.

Heilbron believes the six banks will widen Copa's competitive advantage as the largest carrier in the intra-Latin American market. Heilbron points out other Latin American airlines only currently operate two connecting banks or "maybe two and a half at most".

"For business travellers this is a huge advantage," Heilbron says. He points out while US airports have had seven or eight connecting banks for decades "in Latin America we're not used to this".

He says the two additional banks will also further improve utilisation of Copa's airport assets. It also creates opportunities for better connections and schedules and more frequencies.

For example, Copa announced last month plans to add in June a sixth daily flight to Panama City from Bogota, a fifth daily flight from Lima and a fourth daily flight from Miami. Heilbron says these extra flights are supported by strong local demand but also the new banks mean there are now opportunities to create new connections with these cities.

Copa also announced last month plans to add from 15 June Nassau, Porto Alegre and Toronto as new destinations. Heilbron points out that Toronto, Copa's first destination in Canada, was a destination only made possible by the additional banks. "With a six-bank hub we have now much better schedule flexibility. We can fly Toronto with a better schedule and make it connect with connecting banks in Panama," he explains.

The June capacity expansion is made possible by the delivery of three additional Boeing 737-800s in the first half of this year. Copa also expects to take seven additional 737-800s in the second half of this year. In preparation for these aircraft, Copa is now looking at several possible new destinations as well as additional capacity to existing destinations for its winter 2011-2012 schedule.

"Later in the year - probably before the end of June - we will announce at least three additional destinations and more frequencies," Heilbron says.

The new destinations means Copa will end the year with over 50 spokes from Panama City. Heilbron points out that Copa's Panama City hub already has far more destinations than any competitors' hub in Latin America, an advantage made possible by Tocumen's larger and less congested terminal.

"We've got by far the most international gates and the most international destinations," Heilbron says. "Plus this hub we operate all ourselves. We're the dominant carrier. In some of the other hubs [in Latin America] there are two or more carriers splitting the market."

Panama City now accounts for nearly 90% of Copa's capacity. The other 10% is mainly domestic Colombia capacity operated by its Copa Colombia unit.

Heilbron says most of the additional capacity this year will be directed to the Panama-based Copa Airlines unit. In Colombia, Copa plans to continue de-emphasising its domestic operation in favour of more international flying. This trend started last year, with Copa Colombia adding capacity to Central America as well in point-to-point markets connecting Bogota with international destinations in South America and the Caribbean.

"We'll continue doing that this year," says Copa CFO Victor Vial, adding that by the end of 2011 Copa Colombia "will have close to 50% of their capacity on international routes, which end up being more profitable".