Avianca’s closure of its hub in Costa Rica has opened up opportunities for other carriers, particularly US carriers and Panama-based Copa. The Latin American airline group significantly downgraded its operation at the Costa Rican capital San Jose in late 2Q2013 as it cut five routes and reduced frequency on three others. Avianca previously considered San Jose as one of its four hubs but now calls it a focus city.

US carriers have been adding capacity to San Jose, with Delta launching service to Los Angeles, one of six destinations cut by Avianca. JetBlue has launched service to Fort Lauderdale.

Copa Airlines is also adding capacity to San Jose and will become the airport’s largest carrier in early Oct-2013, when it adds a ninth daily flight from Panama City. Avianca was using San Jose as a competing north-south hub although the number of transit passengers had been small compared to its other hubs and miniscule compared to Copa’s hub in Panama City.

Avianca still has 11 routes from San Jose but only a 26% share of capacity

Avianca has dropped service from San Jose Juan SantaMaria Airport to Los Angeles, New York, Havana, Monterrey in Mexico and Quito/Guayaquil in Ecuador. (The Ecuador service operated on a San Jose-Quito-Guayaquil-San Jose circular routing). Avianca, previously known as Avianca-TACA, also cut back service to Guatemala City, Lima and Panama City from double daily to daily.

Avianca still operates 13 daily flights and 11 routes from San Jose, giving it currently a leading 26% share of international capacity. But Avianca’s approximately 21,600 weekly international seats at San Jose is about to be overtaken by Copa, which will see its capacity increase from about 21,000 weekly seats in Sep-2013 to over 23,000 weekly seats in Oct-2013. This will give Copa a leading 28% share of international capacity at San Jose compared to about 26% for Avianca.

Copa is upgrading its Panama City-San Jose service to eight daily flights at the beginning of Oct-2013. Six of its Panama City-San Jose flights continue onto other destination in Central America, including two each to Guatemala City and Managua and one each to San Pedro Sula and Tegucigalpa. This gives Copa a total of 14 daily flights in the San Jose market in Oct-2013.

Copa also opened a lounge at San Jose in Mar-2013, strengthening its position in the market. Previously the only airline VIP lounge in San Jose was from Avianca/TACA. While Copa and Avianca-TACA are both members of the Star Alliance, the Avianca-TACA lounge in San Jose was not open to Copa passengers including passengers with Star Alliance gold cards.

San Jose becomes Copa’s largest destination

With the eighth daily frequency, Panama City-San Jose will become Copa’s largest route, overtaking Panama City-Bogota, which is a hub-to-hub route as Copa’s Colombian subsidiary is based in Bogota. This is first time Copa has served any route with as many as eight frequencies although CEO Pedro Heilbron has played down the potential impact of Avianca’s reduction in San Jose. “Their San Jose hub was their weakest,” Mr Heilbron told analysts during the carrier’s 2Q2013 results presentation. “We do not expect a material difference or material benefit.”

But Copa likely was a driver in Avianca’s decision to close the San Jose hub as the Panamanian carrier has been expanding aggressively in the Costa Rican market in recent years, gaining market share and weakening the position of Avianca.

On the Panama City-San Jose route Copa’s capacity has increased by about 70% over the last two years. Panama-Costa Rica is a strong market but cannot alone support the large steady increase in capacity. Copa’s sixth freedom traffic to and from Costa Rica has clearly grown significantly.

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