Copa Airlines Provides a Way to Buy Latin America’s Growth

Panama’s Copa Airlines (CPA) is in the sweet spot: Its margins are growing, Latin America is a bright spot in a bright global aviation picture and investors seem to have developed an unbridled enthusiasm for the stock.

Copa shares closed Friday at $111.98, up 23% year to date and up 116% in the past 52 weeks.

Last week, Copa hosted an investor day in New York, the same day the International Air Travel Association reported on Thursday that Latin American airlines experienced an April demand increase of 16%, the fastest monthly increase since December 2011.

At the presentation, Copa CEO Pedro Heilbron said the carrier is working to produce 2017 margins at the high end of the company’s 15% to 17% guidance range.

«The economies continue to strengthen in our region,» Heilbron said in an interview. «As we implement some of the ancillary revenue opportunities, which we haven’t maximized yet, we can see our margins returning to similar to what we had before the economic crisis in Latin America — that was in the 19% range.»

Potential hazards would seem to include stock market cyclicality, growing capacity in Latin America and the threat of a U.S.-imposed laptop ban.

A ban, if one were to be imposed, would likely reduce travel on all carriers. Theoretically, Heilbron said, the impact on Copa and other Latin American carriers would be less than on carriers that carry a higher proportion of business travelers.

«We would be in the same boat as everybody else, but Latin America less than other regions, {due to} more leisure traffic,» he said. Still, he said, using an idiom, «Mal de muchos, Consuelo de tontos,» which means, «the misfortune of many is the consolation of the stupid.»

A key factor in Copa’s North American presence is a long-standing code-share partnership with United (UAL) .

«Copa is a great partner and has been ever since the Continental days,» said Patrick Quayle, United vice president of international network. Continental once owned 51% of Copa.

United and Copa continue to have extensive code-sharing. In particular, Quayle said, United flies from Newark and Houston to Panama City, and has extensive code-shares beyond Panama City…

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