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

O'Connell, John F., Martinez Avellana, Raquel, Warnock-Smith, David orcid logoORCID: 0000-0002-1887-3278 and Efthymiou, Marina orcid logoORCID: 0000-0001-8611-5973 (2020) Evaluating drivers of profitability for airlines in Latin America: A case study of Copa Airlines. Journal of Air Transport Management, 84 . pp. 1-15. ISSN 0969-6997

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.
Metadata
Item Type:Article (Published)
Refereed:Yes
Additional Information:Article Number 101727
Uncontrolled Keywords:Latin America; Product and organisational architecture; Copa airlines; Profitability; Panama
Subjects:UNSPECIFIED
DCU Faculties and Centres:DCU Faculties and Schools > DCU Business School
Publisher:Elsevier
Official URL:https://dx.doi.org/10.1016/j.jairtraman.2019.10172...
Copyright Information:© 2019 Elsevier
ID Code:25613
Deposited On:16 Mar 2021 10:36 by Marina Efthymiou . Last Modified 16 Mar 2021 10:36
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