As LATAM prepares to consciously uncouple from American, the discussion has centered around what American can do to shore up its already-solid Latin American network. In the vision I laid out recently, the least controversial piece was that American should use Gol (an airline that was unconsciously uncoupled from Delta as part of this) to feed its Brazilian network. That’s really a no-brainer. But my second suggestion of snagging Copa away from United was met with more resistance. Some of you asked for it, so here it is: the case for Copa making the switch.
I’ll set some boundaries here. I’m looking at this from a US <–> Latin America perspective. This is about how the partnership of American and Copa would be more beneficial than the current United and Copa agreement; it’s not looking at the airline overall. Let’s start with this from American’s perspective.
American’s Perspective
For American the loss of LATAM hurts only slightly from a network standpoint. American already serves nearly all of the destinations in South America that generate significant traffic. The few it doesn’t serve can either be added by American (likely with MAX or neo aircraft) or through very limited partnerships.
Sure, those who remain loyal to LATAM will be tougher to retain, but American has its own strong loyalty in South America that goes back decades. Fun fact: According to DB1B data, for the year ending March 31, 2019, nearly 60 percent of American’s passengers flying between the US and South America originated in South America.
On the one hand, this is about American filling in the corners where it needs help. Gol is great for that. Gol can aggregate the drips of traffic that want to go from small town Brazil up to the US and funnel those people on to American flights (or vice versa). Every little bit helps, and the volume should help to bolster additional American frequencies to the country.
While Copa can serve that same purpose in northern South America, it can do more than that for American. Think about this from the US perspective. To serve South America, American has its big hub in Miami with a secondary hub in Dallas/Fort Worth. Nearly everything has to funnel through those cities to reach South America.
This may work from bigger cities throughout the country that have frequent flights to Miami, but it doesn’t work as well beyond that.
Take Las Vegas, for example. Looking at a random date in the future, American’s options to go from Las Vegas to Lima are either an afternoon flight via DFW connecting to a redeye or the same thing via Miami with a very long layover. (There’s also a redeye to Miami followed by an 8+ hour layover, if that’s more your bag.) If you add Copa to the mix, then you can do a redeye to Panama City followed by an easy connection to Lima.
Adding a Panama City hub to a Miami and Dallas/Fort Worth operation gives better coverage with more frequencies at more times of day. In a joint venture, they could work to time flights better to not only allow better single connection options but double connects as well.
This assumes that Copa would keep most of its network intact and American and Copa would come together to open new routes. I’d expect an easy case to be made for American’s hubs in Phoenix, Charlotte, and Philadelphia. Opportunities abound to connect places like Austin, St Louis, and Nashville among others.
Would this dilute the Miami hub? Possibly to some extent. But the upside is there to be able to take more traffic with better coverage and frequencies on both sides.
That’s the easy argument. The hard part is convincing Copa.
A Harder Sell for Copa
Leaving United would be a huge turn of events for Copa. The airline was basically Continental Junior for many years. In the late 1990s, Continental owned 51 percent of Copa. Copa used the OnePass program and even painted its airplanes to look almost identical to those of Continental. Between 2005 and 2008, Continental sold everything off. Then United and Continental merged, but the relationship carried over. Copa even used the MileagePlus program as its own until 2015 when it launched its own program, ConnectMiles.
Copa is part of a pending joint venture application that would see the airline join forces with United and Avianca (and possibly Azul if the rumors are true). That is where I’d start the pitch.
United owns a good chunk of flailing Avianca, so it has incentives to try to fix that airline. Avianca is based in Bogota but also has hublets in Central America, remnants of the TACA empire that Avianca mostly destroyed. In other words, Avianca’s hubs surround Copa’s home in Panama City.
In a three-way arrangement, Copa feels like a third wheel by necessity. Or at the very least, it’s the second wheel that has to help prop up the mess of a third wheel. Historical ties between Copa and United (or its predecessor) may be strong, but the same could have been said for LATAM and American. Nothing is off the table, if the deal is right.
American’s strength in Latin America should help turbo-charge the Panama City hub beyond its already turbo-charged state. Copa would be the only partner in Latin America in the joint venture, and it could then deal with Avianca as a competitor instead of a messy organization that could bring Copa down with it. American’s strong loyalty base in Latin America would help Copa to grow from both ends, something that United alone can’t provide.
In the US, there would be some initial moves to shift capacity from United strongholds to American strongholds, but ultimately there would be more new growth opportunities as all the dots get connected.
I realize this is a controversial suggestion, and I’ve had lengthy discussions with others in the industry who disagree with me vehemently. I can see both sides of this debate, but in my mind, Copa is better off making the move. American would be too.
