SAO PAULO, May 29 (Reuters) - Panama’s Copa Airlines plans to expand its route network out of Latin America despite the challenges it currently faces in Brazil, the region’s biggest market, the company’s chief executive officer said on Friday.
The carrier, a subsidiary of Copa Holdings SA, sees further potential in a business model built on linking small and mid-sized Latin American cities with the United States through its Panama City hub, Chief Executive Pedro Heibron told Reuters at an event marking the airline’s 15 years in Brazil.
Copa is currently struggling in Brazil, however, where a rapidly weakening local currency and growing uncertainty over economic growth has slashed Brazilians’ vacation trips to the United States for theme park visits and shopping.
“We are reacting quickly to the drop in demand and plan to cut capacity out of Brazil in June,” Heibron said. “But we feel the economy will recover sooner rather than later.”
Copa expects overall capacity growth of 6 percent in the Americas in 2015, down from 7 percent forecast earlier and strong double-digit growth last year.
But Heibron said Copa will cut most of the new capacity it opened in the second half of 2014 in Brazil, which probably slipped into its worst recession in 2015.
Copa plans to eliminate one of its four flights out of Rio de Janeiro, one flight from Brazilia, reduce its flights from Campinas to four a week and tighten off-season capacity as well, Heibron said.
“If demand is lacking the company has to be commercially aggressive in order to stimulate travel, significantly pressuring unit revenues and margins alike,” Itau BBA analysts led by Renato Salomone wrote earlier this month.
The cuts come as Copa fights off competition from larger rivals such as American Airlines Group Inc and Delta Air Lines Inc, both of which began offering rock-bottom fares to the United States in recent weeks.
“We doubled our capacity overall in the past five years in the Americas and we knew that was not sustainable,” Heibron said. “Growth in the future in Brazil will be healthy but more modest.”
Last month, Copa announced a firm order for 61 737 MAX jets from Boeing Co, which it said would be used to meet new demand in the region and to replace some of its older 98 planes in operation now, Vice President Dennis Cary said.
Copa is about to start a new flight to New Orleans in June, one of the few from Latin America, and announced on Thursday that it would start a new daily flight to San Francisco in September. It also soon will service two new smaller cities in Mexico. (Editing by Dan Grebler)