This content is from: Local Insights

Panama: Aviation industry growth

Panama is enviably located at the heart of the Americas, and has enjoyed sustained growth over the last decade

Felipe Escalona

Panama is enviably located at the heart of the Americas, and has enjoyed sustained growth over the last decade. This growth is due to the country's robust financial centre, free trade zones and container ports, and the $5.25 billion expansion of the Panama Canal. Consequently, Panama has emerged as a hotspot for foreign investment.

Panama's aviation industry has faced significant changes in recent years because of this economic expansion. The principle airport in Panama City, Tocumen International Airport (Tocumen), is currently undergoing its third phase of expansion. This is part of an ambitious renovation programme launched by the Panamanian government in 2006. With an investment of $800 million, the third phase is scheduled to be completed in 2017. Once the renovation is finished, the airport will have 54 gates. Copa Airlines–the largest Panamanian airline–expects its daily number of flights to increase from 400 to 600 once the new terminal opens.

However, some have questioned the motivation behind Tocumen's large-scale expansion in a region whose largest nations suffer from crippling economic weakness. The answer is that Panama enjoys an enviable geographical position compared to its central and south American neighbours. As a result, many of the world's top airlines have seen Panama as an attractive hub from which to develop their expansion plans in Latin America. Additionally, the strong and efficient operation of Copa Airlines out of Tocumen, and the execution of many code-sharing agreements between Copa Airlines and numerous European, Latin American and Middle Eastern operators, have facilitated the arrival of foreign airlines to Panama.

These geographical and economic advantages have been integral to the strategic marketing campaigns put into place by Panama's tourism ministry, as well as by Copa Airlines itself. As a result of this partnership, Tocumen has become known as the 'Hub of the Americas' in the aviation industry.

Another reason for the airport's success is the way it is run. The innovative airport management platform was created through Law No. 23 of January 29 2003, which constituted the regulatory framework for the management of airports and landing strips in Panama. This legislation allowed for the creation of Tocumen, a Panamanian corporation whose shares are fully owned by the Panamanian government. Tocumen's administrative structure paved the way for the modernisation of the terminal. Tocumen also has its own procurement law, which gives its board of directors the authority to approve concession agreements. Tocumen can manage its own procurement processes and issue bonds or any other financial instrument to finance its expansion programme. This structure has been efficient in terms of decision-making and has added a degree of flexibility to the airport's management.

Air transportation agreements

Panama´s legal framework has not been an obstacle to the development of bilateral agreements in relation to commercial aviation rights with other countries, or to the access of foreign or national airlines to the Panamanian air transportation market. Indeed, in 2016, the Civil Aviation Authority of Panama (Autoridad de Aeronautica Civil – the AAC) has already signed three cooperation agreements involving aviation with Holland, Curacao and Aruba. It is expected to sign another four with India, New Zealand, Austria and Japan.

With respect to starting air operations in Panama, the registration process with the AAC is simple and relatively quick compared to other countries in the region. This is due to the knowledge and professionalism of the AAC's staff.

The dynamic nature of Panama's aviation industry has been the catalyst for the development of aviation law specialists in some of the largest and most renowned law firms in Panama. Having knowledgeable counsel is crucial to navigating the regulatory requirements of the Panamanian aviation legal regime and commencing air transportation operations.

Felipe Escalona

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