Economic growth attracts airlines

Panama is part of the plans of two major companies in international aviation.

Both the U.S. company United, which merged with Continental in 2012, and the German airline Lufthansa did not rule out increasing their presence in the Panamanian market. Salvador Marrero, the executive director for United in Central America, explained that the airline manages nine hubs in the United States, and therefore there are possibilities to establish new flights between the two countries.

The airline, which suffered a $723 million dollar loss in 2012, has direct flights between Panama and the cities of Houston and New York, in the United States. Last year the company registered 258,997 passengers on both connections.

Marrero said that 2013 will be a year for the company to stabilize and recover from the processes related to the merger with Continental, with an investment of $550 million dollars.

“In addition to acquiring new aircraft, we are going to invest in improving the passenger experience aboard our aircraft and inside our airports,” he explained.

Wolfgang Will, the CEO for Lufthansa in Mexico and Central America, indicated that Latin America presents an opportune market to drive the company's operations, which last year posted a profit of $524 million dollars.

The executive emphasized how Panama stands out as one of the fastest growing markets in the region, which has brought it to the attention of the German airline.

Lufthansa spots an opportunity to reach other countries in the region and in the Caribbean via the Tocumen air hub in Panama, which is home-base not only for the national Copa Airlines, but has been chosen by more than 70 multinationals as an ideal site to install an office.

Both executives noted that 2013 is shaping up to be a positive year for passenger traffic, but warn that rising fuel prices will continue to weigh down the aviation industry.

Besides fuel costs, the Lufthansa director said that countries are increasingly upping their taxes on the airline. “It seems that governments are copying this model of taxing the aviation business more heavily, which is a delicate situation, because in this business we do not have a wide operating margin,” he commented.

As for any new mergers in the industry, Marrero and Will think that this trend will continue throughout 2013, since companies are seeking out ways to reduce their operating costs and increase profits. This year began with the announcement of a merger between American Airlines and U.S. Airways. If approved by regulators, the merger would turn these two companies into the world's biggest airline group, trailed by Delta, which merged with Western in 2008, and United.