##### Table of Contents



As filed with the
Securities and Exchange Commission on July 2, 2007
   UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION
12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 001-32696
 
 COPA HOLDINGS, S.A.
  Not Applicable
 
 Republic of Panama
 Avenida Principal y Avenida de la Rotonda, Costa del Este
Complejo Business Park, Torre Norte
Parque Lefevre, Panama City
Panama
(+507 304 2677)
 
 Securities registered or to be registered pursuant to Section 12(b) of the Act
 Title of each class:
    
    Name of each exchange on which registeredClass A Common Stock, without par value
    
    New York Stock Exchange
 
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
 
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
 
 Indicate
the number of outstanding shares of each of the issuers classes of capital or common
stock as of the close of the period covered by the annual report:
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.  þYes  oNo
 If this report is an annual or transition report, indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  oYes  þNo
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and non-accelerated filer
in Rule 12b-2 of Exchange Act. (Check one):
 Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-accelerated Filer o
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.  þYes  oNo
 Indicate by check mark which financial statement item the registrant has elected to follow.oItem 17þItem 18
 If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).  oYes  þNo




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##### 



TABLE OF CONTENTS
 Introduction
    
    iiMarket Data
    
    iiPresentation of Financial and Statistical Data
    
    iiiSpecial Note About Forward-Looking Statements
    
    iiiItem 1. Identity of Directors, Senior Management and Advisers
    
    
    1Item 2. Offer Statistics and Expected Timetable
    
    
    1Item 3. Key Information
    
    
    1Item 4. Information on the Company
    
    
    22Item 4A. Unresolved Staff Comments
    
    
    43Item 5. Operating and Financial Review and Prospects
    
    
    43Item 6. Directors, senior management and employees
    
    
    61Item 7. Major Shareholders and Related Party Transactions
    
    
    67Item 8. Financial Information
    
    
    72Item 9. The Offer and Listing
    
    
    73Item 10. Additional Information
    
    
    75Item 11. Quantitative and Qualitative Disclosures about Market Risk
    
    
    88Item 12. Description of Securities Other than Equity Securities
    
    
    89Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    90Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    90Item 15. Controls and Procedures
    
    
    90Item 16. Reserved
    
    
    91Item 16A. Audit Committee Financial Expert
    
    
    91Item 16B. Code of Ethics
    
    
    91Item 16C. Principal Accountant Fees and Services
    
    
    91Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    92Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    92Item 17. Financial Statements
    
    
    92Item 18. Financial Statements
    
    
    92Item 19. Exhibits
    
    
    92Index to Financial Statements
    
    
    F-1Exhibit 10.44Exhibit 10.45Exhibit 10.46Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2
   i




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##### Table of Contents



INTRODUCTION
   
    
    Aircraft utilization represents the average number of block hours operated
per day per aircraft for the total aircraft fleet.
 
    
    Available seat miles or ASMs represents the aircraft seating capacity
multiplied by the number of miles the seats are flown.
 
    
    Average stage length represents the average number of miles flown per
flight.
 
    
    Block hours refers to the elapsed time between an aircraft leaving an
airport gate and arriving at an airport gate.
 
    
    Break-even load factor represents the load factor that would have resulted
in total revenues being equal to total expenses.
 
    
    Load factor represents the percentage of aircraft seating capacity that is
actually utilized (calculated by dividing revenue passenger miles by available seat
miles).
 
    
    Operating expense per available seat mile represents operating expenses
divided by available seat miles.
 
    
    Operating revenue per available seat mile represents operating revenues
divided by available seat miles.
 
    
    Passenger revenue per available seat mile represents passenger revenue
divided by available seat miles.
 
    
    Revenue passenger miles represents the number of miles flown by revenue
passengers.
 
    
    Revenue passengers represents the total number of paying passengers
(including all passengers redeeming OnePass frequent flyer miles and other travel
awards) flown on all flight segments (with each connecting segment being considered a
separate flight segment).
 
    
    Yield represents the average amount one passenger pays to fly one mile.
 
 Market Data
   ii




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##### Table of Contents



Presentation of Financial and Statistical Data
    
 Special Note About Forward-Looking Statements
  
    
    general economic, political and business conditions in Panama and Latin America and
particularly in the geographic markets we serve;
 
    
    our managements expectations and estimates concerning our future financial
performance and financing plans and programs;
 
    
    our level of debt and other fixed obligations;
 
    
    demand for passenger and cargo air service in the markets in which we operate;
 
    
    competition;
 
    
    our capital expenditure plans;
 
    
    changes in the regulatory environment in which we operate;
 
    
    changes in labor costs, maintenance costs, fuel costs and insurance premiums;
 
    
    changes in market prices, customer demand and preferences and competitive conditions;
 
    
    cyclical and seasonal fluctuations in our operating results;
 
    
    defects or mechanical problems with our aircraft;
 
    
    our ability to successfully implement our growth strategy;
  iii




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##### Table of Contents




    
    our ability to obtain financing on commercially reasonable terms; and
 
    
    the risk factors discussed under Risk Factors beginning on page 4.
   iv




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##### Table of Contents



PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 A. Selected Financial Data
 Selected
   Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005(20)
    
    
    2006(in thousands of dollars, except share and per share data and operating data)INCOME STATEMENT DATAOperating revenue:Passenger revenue
    
    $
    269,629
    
    
    $
    311,683
    
    
    $
    364,611
    
    
    $
    563,520
    
    
    $
    798,901Cargo, mail and other
    
    
    31,008
    
    
    
    30,106
    
    
    
    35,226
    
    
    
    45,094
    
    
    
    52,259Total operating revenues
    
    
    300,637
    
    
    
    341,789
    
    
    
    399,837
    
    
    
    608,614
    
    
    
    851,160Operating expenses:Aircraft fuel
    
    
    40,024
    
    
    
    48,512
    
    
    
    62,549
    
    
    
    149,303
    
    
    
    217,730Salaries and benefits
    
    
    39,264
    
    
    
    45,254
    
    
    
    51,701
    
    
    
    69,730
    
    
    
    91,382Passenger servicing
    
    
    33,892
    
    
    
    36,879
    
    
    
    39,222
    
    
    
    50,622
    
    
    
    64,380Commissions
    
    
    28,720
    
    
    
    27,681
    
    
    
    29,073
    
    
    
    45,087
    
    
    
    57,808Reservations and sales
    
    
    16,707
    
    
    
    18,011
    
    
    
    22,118
    
    
    
    29,213
    
    
    
    38,212Maintenance, materials and repairs
    
    
    20,733
    
    
    
    20,354
    
    
    
    19,742
    
    
    
    32,505
    
    
    
    50,057Depreciation
    
    
    13,377
    
    
    
    14,040
    
    
    
    19,279
    
    
    
    19,857
    
    
    
    24,874Flight operations
    
    
    14,567
    
    
    
    15,976
    
    
    
    17,904
    
    
    
    24,943
    
    
    
    33,740Aircraft rentals
    
    
    21,182
    
    
    
    16,686
    
    
    
    14,445
    
    
    
    27,631
    
    
    
    38,169Landing fees and other rentals
    
    
    8,495
    
    
    
    10,551
    
    
    
    12,155
    
    
    
    17,909
    
    
    
    23,929Other
    
    
    19,166
    
    
    
    25,977
    
    
    
    29,306
    
    
    
    32,622
    
    
    
    44,758Fleet impairment charge(1)
    
    
    13,669
    
    
    
    3,572
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    269,796
    
    
    
    283,493
    
    
    
    317,494
    
    
    
    499,422
    
    
    
    685,039Operating income
    
    
    30,841
    
    
    
    58,296
    
    
    
    82,343
    
    
    
    109,192
    
    
    
    166,121Non-operating income (expense):Interest expense
    
    
    (7,629
    )
    
    
    (11,613
    )
    
    
    (16,488
    )
    
    
    (21,629
    )
    
    
    (29,150
    )Interest capitalized
    
    
    1,114
    
    
    
    2,009
    
    
    
    963
    
    
    
    1,089
    
    
    
    1,712Interest income
    
    
    831
    
    
    
    887
    
    
    
    1,423
    
    
    
    3,544
    
    
    
    7,257Other, net(2)
    
    
    (1,490
    )
    
    
    2,554
    
    
    
    6,063
    
    
    
    395
    
    
    
    185Total non-operating expenses, net
    
    
    (7,174
    )
    
    
    (6,163
    )
    
    
    (8,039
    )
    
    
    (16,601
    )
    
    
    (19,996
    )Income before income taxes
    
    
    23,667
    
    
    
    52,133
    
    
    
    74,304
    
    
    
    92,591
    
    
    
    146,125Provision for income taxes
    
    
    (2,999
    )
    
    
    (3,644
    )
    
    
    (5,732
    )
    
    
    (9,592
    )
    
    
    (12,286
    )Net income
    
    
    20,668
    
    
    
    48,489
    
    
    
    68,572
    
    
    
    82,999
    
    
    
    133,839
  1




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##### Table of Contents



Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005(20)
    
    
    2006(in thousands of dollars, except share and per share data and operating data)BALANCE SHEET DATATotal cash, cash equivalents and short-term
investments
    
    $
    34,476
    
    
    $
    61,432
    
    
    $
    110,943
    
    
    $
    114,490
    
    
    $
    197,380Accounts receivable, net
    
    
    24,006
    
    
    
    31,019
    
    
    
    27,706
    
    
    
    46,533
    
    
    
    62,137Total current assets
    
    
    68,940
    
    
    
    103,523
    
    
    
    152,087
    
    
    
    184,351
    
    
    
    290,651Purchase deposits for flight equipment
    
    
    55,867
    
    
    
    45,869
    
    
    
    7,190
    
    
    
    52,753
    
    
    
    65,150Total property and equipment
    
    
    345,411
    
    
    
    480,488
    
    
    
    541,211
    
    
    
    637,543
    
    
    
    862,283Total assets
    
    
    421,935
    
    
    
    591,915
    
    
    
    702,050
    
    
    
    916,912
    
    
    
    1,255,015Long-term debt
    
    
    211,698
    
    
    
    311,991
    
    
    
    380,827
    
    
    
    402,954
    
    
    
    529,802Total shareholders equity
    
    
    67,094
    
    
    
    115,583
    
    
    
    174,155
    
    
    
    245,867
    
    
    
    371,669CASH FLOW DATANet cash provided by operating activities
    
    $
    55,543
    
    
    $
    73,479
    
    
    $
    98,051
    
    
    $
    115,368
    
    
    $
    193,468Net cash used in investing activities
    
    
    (150,203
    )
    
    
    (151,802
    )
    
    
    (85,738
    )
    
    
    (159,886
    )
    
    
    (258,980
    )Net cash provided by financing activities
    
    
    100,400
    
    
    
    105,298
    
    
    
    29,755
    
    
    
    38,929
    
    
    
    141,498OTHER FINANCIAL DATAEBITDA(3)
    
    
    42,728
    
    
    
    74,890
    
    
    
    107,685
    
    
    
    129,444
    
    
    
    191,180Aircraft rentals
    
    
    21,182
    
    
    
    16,686
    
    
    
    14,445
    
    
    
    27,631
    
    
    
    38,169Operating margin(4)
    
    
    10.3
    %
    
    
    17.1
    %
    
    
    20.6
    %
    
    
    17.9
    %
    
    
    19.5
    %Weighted average shares used in computing net
income per share (basic)(5)
    
    
    42,812,500
    
    
    
    42,812,500
    
    
    
    42,812,500
    
    
    
    42,812,500
    
    
    
    42,812,500Weighted average shares used in computing net
income per share (diluted)(5)
    
    
    42,812,500
    
    
    
    42,812,500
    
    
    
    42,812,500
    
    
    
    42,812,500
    
    
    
    43,234,553Net income (loss) per share (basic)(5)
    
    $
    0.48
    
    
    $
    1.13
    
    
    $
    1.60
    
    
    $
    1.94
    
    
    $
    3.13Net income (loss) per share (diluted)(5)
    
    $
    0.48
    
    
    $
    1.13
    
    
    $
    1.60
    
    
    $
    1.94
    
    
    $
    3.10OPERATING DATARevenue passengers carried(6)
    
    
    1,819
    
    
    
    2,028
    
    
    
    2,333
    
    
    
    4,361
    
    
    
    5,741Revenue passenger miles(7)
    
    
    1,875
    
    
    
    2,193
    
    
    
    2,548
    
    
    
    3,824
    
    
    
    5,017Available seat miles(8)
    
    
    2,847
    
    
    
    3,226
    
    
    
    3,639
    
    
    
    5,359
    
    
    
    6,866Load factor(9)
    
    
    65.9
    %
    
    
    68.0
    %
    
    
    70.0
    %
    
    
    71.4
    %
    
    
    73.1
    %Break-even load factor(10)
    
    
    54.5
    %
    
    
    52.8
    %
    
    
    52.6
    %
    
    
    57.9
    %
    
    
    58.0
    %Total block hours(11)
    
    
    58,112
    
    
    
    64,909
    
    
    
    70,228
    
    
    
    103,628
    
    
    
    130,818Average daily aircraft utilization(12)
    
    
    8.8
    
    
    
    9.0
    
    
    
    9.3
    
    
    
    9.8
    
    
    
    9.8Average passenger fare
    
    
    148.2
    
    
    
    153.7
    
    
    
    156.3
    
    
    
    129.2
    
    
    
    139.2Yield(13)
    
    
    14.38
    
    
    
    14.22
    
    
    
    14.31
    
    
    
    14.74
    
    
    
    15.92Passenger revenue per ASM(14)
    
    
    9.47
    
    
    
    9.66
    
    
    
    10.02
    
    
    
    10.51
    
    
    
    11.64Operating revenue per ASM(15)
    
    
    10.56
    
    
    
    10.60
    
    
    
    10.99
    
    
    
    11.36
    
    
    
    12.40Operating expenses per ASM
(CASM)(16)
    
    
    9.48
    
    
    
    8.79
    
    
    
    8.72
    
    
    
    9.32
    
    
    
    9.98Departures
    
    
    23,361
    
    
    
    25,702
    
    
    
    27,434
    
    
    
    48,934
    
    
    
    65,471Average daily departures
    
    
    64.0
    
    
    
    70.4
    
    
    
    75.0
    
    
    
    156.6
    
    
    
    179.4Average number of aircraft
    
    
    18.1
    
    
    
    19.8
    
    
    
    20.6
    
    
    
    31.0
    
    
    
    38.6Airports served at period end
    
    
    27
    
    
    
    28
    
    
    
    29
    
    
    
    36
    
    
    
    42SEGMENT FINANCIAL DATACopa:Operating revenue
    
    $
    300,637
    
    
    $
    341,789
    
    
    $
    399,837
    
    
    $
    505,655
    
    
    $
    676,168Operating expenses
    
    
    269,796
    
    
    
    283,493
    
    
    
    317,494
    
    
    
    402,684
    
    
    
    509,540Depreciation
    
    
    13,377
    
    
    
    14,040
    
    
    
    19,279
    
    
    
    19,242
    
    
    
    23,732Aircraft rentals
    
    
    21,182
    
    
    
    16,686
    
    
    
    14,445
    
    
    
    22,096
    
    
    
    23,842Interest expense
    
    
    7,629
    
    
    
    11,613
    
    
    
    16,488
    
    
    
    19,424
    
    
    
    26,907Interest capitalized
    
    
    1,114
    
    
    
    2,009
    
    
    
    963
    
    
    
    1,089
    
    
    
    1,712Interest income
    
    
    831
    
    
    
    887
    
    
    
    1,423
    
    
    
    3,376
    
    
    
    6,887Net income (loss) before tax
    
    
    23,667
    
    
    
    52,133
    
    
    
    74,304
    
    
    
    89,745
    
    
    
    155,533Total assets
    
    
    421,935
    
    
    
    591,915
    
    
    
    702,050
    
    
    
    851,075
    
    
    
    1,168,121AeroRepública:(21)Operating revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    103,016
    
    
    $
    175,883Operating expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,839
    
    
    
    176,388Depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    615
    
    
    
    1,142Aircraft rentals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,535
    
    
    
    14,604Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,205
    
    
    
    2,243Interest capitalized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168
    
    
    
    370Net income (loss) before tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,846
    
    
    
    (9,408
    )Total assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,091
    
    
    
    132,872
  2




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##### Table of Contents



Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005(20)
    
    
    2006(in thousands of dollars, except share and per share data and operating data)SEGMENT OPERATING DATACopa:Available seat miles(8)
    
    
    2,847
    
    
    
    3,226
    
    
    
    3,639
    
    
    
    4,409
    
    
    
    5,239Load factor(9)
    
    
    65.9
    %
    
    
    68.0
    %
    
    
    70.0
    %
    
    
    73.4
    %
    
    
    77.8
    %Break-even load factor
    
    
    54.5
    %
    
    
    52.8
    %
    
    
    52.6
    %
    
    
    56.8
    %
    
    
    56.1
    %Yield(13)
    
    
    14.38
    
    
    
    14.22
    
    
    
    14.31
    
    
    
    14.41
    
    
    
    15.49Operating revenue per ASM(15)
    
    
    10.56
    
    
    
    10.60
    
    
    
    10.99
    
    
    
    11.47
    
    
    
    12.91CASM(16)
    
    
    9.48
    
    
    
    8.79
    
    
    
    8.72
    
    
    
    9.13
    
    
    
    9.73Average stage length(18)
    
    
    1,010
    
    
    
    1,028
    
    
    
    1,047
    
    
    
    1,123
    
    
    
    1,158On time performance(17)
    
    
    90.5
    %
    
    
    91.4
    %
    
    
    91.8
    %
    
    
    91.7
    %
    
    
    91.0
    %AeroRepública:(21)Available seat miles(8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    950
    
    
    
    1,627Load factor(9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62.0
    %
    
    
    57.9
    %Break even load factor
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60.8
    %
    
    
    61.9
    %Yield(13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16.53
    
    
    
    17.79Operating revenue per ASM(15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.84
    
    
    
    10.81CASM(16)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.19
    
    
    
    10.84Average stage length(18)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    360
    
    
    
    370On time performance(19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70.4
    %
    
    
    80.3
    %
 
 (1)
    
    Represents impairment losses on our Boeing 737-200 aircraft and related assets.(2)
    
    Consists primarily of changes in the fair value of fuel derivative contracts, foreign
exchange gains/losses and gains on sale of Boeing 737-200 aircraft. See Item 5. Operating
and Financial Review and Prospects and the notes to our consolidated financial statements.(3)
    
    EBITDA represents net income (loss) plus the sum of interest expense, income taxes,
depreciation and amortization minus the sum of interest capitalized and interest income.
EBITDA is presented as supplemental information because we believe it is a useful indicator of
our operating performance and is useful in comparing our operating performance with other
companies in the airline industry. However, EBITDA should not be considered in isolation, as
a substitute for net income prepared in accordance with U.S. GAAP or as a measure of a
companys profitability. In addition, our calculation of EBITDA may not be comparable to
other companies similarly titled measures. The following table presents a reconciliation of
our net income to EBITDA for the specified periods:
 Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(in thousands of dollars)Net income
    
    $
    20,668
    
    
    $
    48,489
    
    
    $
    68,572
    
    
    $
    82,999
    
    
    $
    133,839Interest expense
    
    
    7,629
    
    
    
    11,613
    
    
    
    16,488
    
    
    
    21,629
    
    
    
    29,150Income taxes
    
    
    2,999
    
    
    
    3,644
    
    
    
    5,732
    
    
    
    9,592
    
    
    
    12,286Depreciation
    
    
    13,377
    
    
    
    14,040
    
    
    
    19,279
    
    
    
    19,857
    
    
    
    24,874Subtotal
    
    
    44,673
    
    
    
    77,786
    
    
    
    110,071
    
    
    
    134,077
    
    
    
    200,149Interest capitalized
    
    
    (1,114
    )
    
    
    (2,009
    )
    
    
    (963
    )
    
    
    (1,089
    )
    
    
    (1,712
    )Interest income
    
    
    (831
    )
    
    
    (887
    )
    
    
    (1,423
    )
    
    
    (3,544
    )
    
    
    (7,257
    )EBITDA
    
    
    42,728
    
    
    
    74,890
    
    
    
    107,685
    
    
    
    129,444
    
    
    
    191,180
 Aircraft rentals represents a significant operating expense of our business. Because we leased
several of our aircraft during the periods presented, we believe that when assessing our EBITDA
you should also consider the impact of our aircraft rent expense, which was $21.2 million in
2002, $16.7 million in 2003, $14.4 million in 2004, $27.6 million in 2005, and $38.2 million in
2006.(4)
    
    Operating margin represents operating income divided by operating revenues.(5)
    
    All share and per share amounts have been retroactively restated to reflect the current
capital structure described under Description of Capital Stock and in the notes to our
consolidated financial statements.(6)
    
    Total number of paying passengers (including all passengers redeeming OnePass frequent flyer
miles and other travel awards) flown on all flight segments, expressed in thousands.(7)
    
    Number of miles flown by scheduled revenue passengers, expressed in millions.(8)
    
    Aircraft seating capacity multiplied by the number of miles the seats are flown, expressed in
millions.(9)
    
    Percentage of aircraft seating capacity that is actually utilized. Load factors are
calculated by dividing revenue passenger miles by available seat miles.(10)
    
    Load factor that would have resulted in total revenues being equal to total expenses.(11)
    
    The number of hours from the time an airplane moves off the departure gate for a revenue
flight until it is parked at the gate of the arrival airport.(12)
    
    Average number of block hours operated per day per aircraft for the total aircraft fleet.(13)
    
    Average amount (in cents) one passenger pays to fly one mile.(14)
    
    Passenger revenues (in cents) divided by the number of available seat miles.(15)
    
    Total operating revenues for passenger aircraft related costs (in cents) divided by the
number of available seat miles.(16)
    
    Total operating expenses for passenger aircraft related costs (in cents) divided by the
number of available seat miles.
  3




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##### Table of Contents



(17)
    
    Percentage of flights that arrive at the destination gate within fifteen minutes of scheduled
arrival.(18)
    
    The average number of miles flown per flight.(19)
    
    Percentage of flights that depart within fifteen minutes of the scheduled departure time.(20)
    
    For AeroRepública operating data, this period covers from April 22, 2005 until December 31,
2005 which corresponds to the period that AeroRepública was consolidated in our financial
statements.(21)
    
    AeroRepública has not historically distinguished between revenue passengers and non-revenue
passengers. Although we are implementing systems at AeroRepública to record that information,
revenue passenger information and other statistics derived from revenue passenger data for the
year ended December 31, 2005 and 2006 has been derived from estimates that we believe to be
materially accurate.
 B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 An investment in our Class A shares involves a high degree of risk. You should carefully
consider the risks described below before making an investment decision. Our business, financial
condition and results of operations could be materially and adversely affected by any of these
risks. The trading price of our Class A shares could decline due to any of these risks, and you
may lose all or part of your investment. The risks described below are those known to us and that
we currently believe may materially affect us.
 Risks Relating to Our Company
 Our failure to successfully implement our growth strategy may adversely affect our results of
operations and harm the market value of our Class A shares.
     4




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##### Table of Contents



If we fail to successfully integrate the new Embraer 190 aircraft we have agreed to purchase into
our operations, our business could be harmed.
  
    
    difficulties or delays in obtaining the necessary certifications from the
aviation regulatory authorities of the countries to which we fly;
 
    
    manufacturers delays in meeting the agreed upon aircraft delivery schedule;
 
    
    difficulties in obtaining financing on acceptable terms to complete our purchase
of all of the aircraft we have committed to purchase; and
 
    
    the inability of the new aircraft and its components to comply with agreed upon
specifications and performance standards.
   We are dependent on our alliance with Continental and cannot assure you that it will continue.
   5




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##### Table of Contents



Continentals economic interest in our continued success can be expected to further decline over
time.
  We operate using a hub-and-spoke model and are vulnerable to competitors offering direct flights
between destinations we serve.
   6




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##### Table of Contents



The Panamanian Aviation Act and certain of the bilateral agreements under which we operate contain
Panamanian ownership requirements that are not clearly defined, and our failure to comply with
these requirements could cause us to lose our authority to operate in Panama or to the
international destinations we serve.
   Autoridad de Aeronáutica Civil
 Our business is subject to extensive regulation which may restrict our growth or our operations or
increase our costs.
    7




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##### Table of Contents



The growth of our operations to the United States and the benefits of our code-sharing arrangements
with Continental are dependent on Panamas continued favorable safety assessment.
  We are highly dependent on our hub at Panama Citys Tocumen International Airport.
   8




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##### Table of Contents



We are exposed to increases in landing charges and other airport access fees and cannot be assured
access to adequate facilities and landing rights necessary to achieve our expansion plans.
    We have significant fixed financing costs and expect to incur additional fixed costs as we expand
our fleet.
   
    
    limit our ability in the future to obtain additional financing for working
capital or other important needs;
 
    
    impair our liquidity by diverting substantial cash from our operating needs to
service fixed financing obligations; or
 
    
    limit our ability to plan for or react to changes in our business, in the
airline industry or in general economic conditions.
  9




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##### Table of Contents



The cost of refinancing our debt and obtaining additional financing for new aircraft could increase
significantly if the Export-Import Bank of the United States does not continue to guarantee our
debt.
  Our existing debt financing agreements and our aircraft operating leases contain restrictive
covenants that impose significant operating and financial restrictions on us.
  
    
    create material liens on our assets;
 
    
    take certain actions that may impair creditors rights to our aircraft;
 
    
    sell assets or engage in certain mergers or consolidations; and
 
    
    engage in other specified significant transactions.
   10




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##### Table of Contents



If we were to determine that our aircraft, rotable parts or inventory were impaired, it would have
a significant adverse effect on our operating results.
 Accounting for the
Impairment or Disposal of Long-Lived
Assets
 We rely on information technology systems, and we may become more dependent on such systems in the
future.
  Our quarterly results can fluctuate substantially, and the trading price of our Class A shares may
be affected by such variations.
   Our reputation and financial results could be harmed in the event of an accident or incident
involving our aircraft.
   11




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##### Table of Contents



Fluctuations in foreign exchange rates could negatively affect our net income.
  Our maintenance costs will increase as Copas fleet ages and as we perform maintenance on
AeroRepúblicas older fleet.
   If we enter into a prolonged dispute with any of our employees, many of whom are represented by
unions, or if we are required to increase substantially the salaries or benefits of our employees,
it may have an adverse impact on our operations and cash flows.
    12




---



##### Table of Contents



Our investment in AeroRepública may not generate the benefits we sought when we purchased the
company.
   The integration of AeroRepública into our business may require a significant amount of our
managements time and distract our management from our core operations.
  Our revenues depend on our relationship with travel agents and tour operators.
  
    
    the size of commissions offered by other airlines;
 
    
    changes in our arrangements with other distributors of airline tickets; and
 
    
    the introduction and growth of new methods of selling tickets.
 We rely on third parties to provide our customers and us with facilities and services that are
integral to our business.
   13




---



##### Table of Contents



We depend on a limited number of suppliers for our aircraft and engines.
    We are dependent on key personnel.
  Our operations in Cuba, which has been identified by the U.S. Department of State as a state
sponsor of terrorism, may adversely affect our reputation and the liquidity and value of our Class
A shares.
   14




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##### Table of Contents



Risks Relating to the Airline Industry
 The airline industry is highly competitive.
   We may face increasing competition from low-cost carriers offering discounted fares.
   15




---



##### Table of Contents



Significant changes or extended periods of high fuel costs or fuel supply disruptions could
materially affect our operating results.
  Because the airline industry is characterized by high fixed costs and relatively elastic revenues,
airlines cannot quickly reduce their costs to respond to shortfalls in expected revenue.
  Airline bankruptcies could adversely affect the industry.
  Our business may be adversely affected by downturns in the airline industry caused by terrorist
attacks, war or outbreak of disease, which may alter travel behavior or increase costs.
   16




---



##### Table of Contents



Increases in insurance costs and/or significant reductions in coverage would harm our business,
financial condition and results of operations.
  We may experience difficulty finding, training and retaining employees.
  Failure to comply with applicable environmental regulations could adversely affect our business.
   17




---



##### Table of Contents



Risks Relating to Panama and our Region
 Our performance is heavily dependent on economic conditions in the countries in which we do
business.
  
    
    changes in economic or other governmental policies;
 
    
    changes in regulatory, legal or administrative practices; or
 
    
    other political or economic developments over which we have no control.
  We are highly dependent on conditions in Panama.
  We have paid low taxes in the past, and any increase in the taxes we or our shareholders pay in
Panama or the other countries where we do business would adversely affect the value of our Class A
shares.
   18




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##### Table of Contents



Political unrest and instability in Colombia may adversely affect our business and the market price
of our Class A shares.
  Risks Relating to Our Class A Shares
 The value of our Class A shares may be adversely affected by ownership restrictions on our capital
stock and the power of our board of directors to take remedial actions to preserve our operating
license and international route rights by requiring sales of certain outstanding shares or issuing
new stock.
 (Pacto Social)
   19




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##### Table of Contents



Our controlling shareholder has the ability to direct our business and affairs, and its interests
could conflict with yours.
  The Class A shares will only be permitted to vote in very limited circumstances and may never have
full voting rights.
  Substantial future sales of our Class A shares by Continental or CIASA could cause the price of the
Class A shares to decrease.
   20




---



##### Table of Contents



Holders of our common stock are not entitled to preemptive rights, and as a result you may
experience substantial dilution upon future issuances of stock by us.
  You may not be able to sell our Class A shares at the price or at the time you desire because an
active or liquid market for the Class A shares may not continue.
  Our board of directors may, in its discretion, amend or repeal our dividend policy. You may not
receive the level of dividends provided for in the dividend policy or any dividends at all.
  To the extent we pay dividends to our shareholders, we will have less capital available to meet our
future liquidity needs.
  Our Articles of Incorporation impose ownership and control restrictions on our company which ensure
that Panamanian nationals will continue to control us and that these restrictions operate to
prevent any change of control or some transfers of ownership in order to comply with the Aviation
Act and other bilateral restrictions.
   21




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##### Table of Contents



The protections afforded to minority shareholders in Panama are different from and more limited
than those in the United States and may be more difficult to enforce.
  Developments in Latin American countries and other emerging market countries may cause the market
price of our Class A shares to decrease.
  
 Item 4. Information on the Company
 A. History and Development of the Company
 General
    22




---



##### Table of Contents



sociedad anónima
   Capital Expenditures
  B. Business Overview
     23




---



##### Table of Contents



Our Strengths
  
    
    Our Hub of the Americas airport is strategically located.We believe that Copas base
of operations at the geographically central location of Tocumen International Airport in
Panama City, Panama provides convenient connections to our principal markets in North,
Central and South America and the Caribbean, enabling us to consolidate traffic to serve
several destinations that do not generate enough demand to justify point-to-point service.
Flights from Panama operate with few service disruptions due to weather, contributing to
high completion factors and on-time performance. Tocumen International Airports sea-level
altitude allows our aircraft to operate without performance restrictions that they would be
subject to at higher-altitude airports. We believe that Copas hub in Panama allows us to
benefit from Panama Citys status as a center for financial services, shipping and commerce
and from Panamas stable, dollar-based economy, free-trade zone and growing tourism.
 
    
    We focus on keeping our operating costs low.In recent years, our low operating costs
and efficiency have contributed significantly to our profitability. Our operating cost per
available seat mile, excluding costs for fuel and fleet impairment charges, was 7.59 cents
in 2002, 7.17 cents in 2003, 7.01 cents in 2004, 6.53 cents in 2005 and 6.81 cents in 2006.
See Item 5. Operating and Financial Review and Prospects for a reconciliation of our
operating cost per available seat mile when excluding costs for fuel and fleet impairment
charges to our operating cost per available seat mile. We believe that our cost per
available seat mile reflects our modern fleet, efficient operations and the competitive
cost of labor in Panama.
 
    
    Copa operates a modern fleet.Copas fleet consists of modern Boeing 737-Next
Generation and Embraer 190 aircraft equipped with winglets and other modern cost-saving and
safety features. Over the next four years, Copa intends to enhance its modern fleet
through the addition of at least ten additional Boeing 737-Next Generation aircraft and
nine new Embraer 190s. We believe that Copas modern fleet contributes to its on-time
performance and high completion factor (percentage of scheduled flights not cancelled). We
expect our Boeing 737-700s, 737-800s and Embraer 190s to continue offering substantial
operational cost advantages in terms of fuel efficiency and maintenance costs.
AeroRepública is currently implementing a fleet modernization and expansion plan. Since
December 2006, AeroRepública has taken delivery of its first four Embraer 190 aircraft and
had firm commitments on four additional Embraer 190s and options for an additional eight
Embraer 190 aircraft.
  24




---



##### Table of Contents




    
    We believe Copa has a strong brand and a reputation for quality service.We believe
that the Copa brand is associated with value to passengers, providing world-class service
and competitive pricing. For the three months ended March 31, 2007, Copa Airlines
statistic for on-time performance was 91.0%, completion factor was 99.8% and baggage
handling was 1.5 mishandled bags per 1000 passengers. Our goal is to apply our expertise in
these areas to improve AeroRepúblicas service statistics to comparable levels. Our focus
on customer service has helped to build passenger loyalty. We believe that our brand has
also been enhanced through our relationship with Continental, including our joint marketing
of the OnePass loyalty program in Latin America, the similarity of our aircraft livery and
aircraft interiors and our participation in Continentals Presidents Club lounge program.
 
    
    Our management fosters a culture of teamwork and continuous improvement.Our management
team has been successful at creating a culture based on teamwork and focused on continuous
improvement. Each of our employees at Copa has individual objectives based on corporate
goals that serve as a basis for measuring performance. When corporate operational and
financial targets are met, employees at Copa are eligible to receive bonuses according to
our profit sharing program. See Item 6D. Employees. We also recognize outstanding
performance of individual employees through company-wide recognition, one-time awards,
special events and, in the case of our senior management, grants of restricted stock and
stock options. Copas goal-oriented culture and incentive programs have contributed to a
motivated work force that is focused on satisfying customers, achieving efficiencies and
growing profitability. We seek to create a similar culture at AeroRepública.
 Our Strategy
  
    
    Expand our network by increasing frequencies and adding new destinations.We believe
that demand for air travel in Latin America is likely to expand in the next decade, and we
intend to use our increasing fleet capacity to meet this growing demand. We intend to focus
on expanding our operations by increasing flight frequencies on our most profitable routes
and initiating service to new destinations. Copas Panama City hub allows us to consolidate
traffic and provide service to certain underserved markets, particularly in Central America
and the Caribbean, and we intend to focus on providing new service to regional destinations
that we believe best enhance the overall connectivity and profitability of our network.
With the addition of Embraer 190 aircraft and growth in overall capacity, we expect to have
more flexibility in scheduling our flights for our customers convenience.
    
    Continue to focus on keeping our costs low.We seek to reduce our cost per available
seat mile without sacrificing services valued by our customers as we execute our growth
plans. Our goal is to maintain a modern fleet and to make effective use of our resources
through efficient aircraft utilization and employee productivity. We intend to reduce our
distribution costs by increasing direct sales, including internet and call center sales, as
well as improving efficiency through technology and automated processes.
    
    Introduce service with new Embraer 190 aircraft.We believe that the addition of the
Embraer 190 aircraft allows us to provide efficient service to new destinations in
underserved markets. In addition, we believe that the Embraer 190s enhance our ability to
efficiently match our capacity to demand, allowing us to improve service frequencies to
currently served markets and to redeploy our higher capacity aircraft to serve routes with
greater demand.
    
    Emphasize superior service and value to our customers.We intend to continue to focus
on satisfying our customers and earning their loyalty by providing a combination of
superior service and competitive fares. We believe that continuing our operational success
in keeping flights on time, reducing mishandled luggage and offering convenient schedules
to attractive destinations will be essential to achieving this goal. We intend to continue
to incentivize our employees to improve or maintain operating and service metrics relating
to our customers satisfaction by continuing our profit sharing plan and employee
recognition
programs and to reward customer loyalty with the popular OnePass frequent flyer program,
upgrades and access to Presidents Club lounges.
  25




---



##### Table of Contents




    
    Capitalize on opportunities at AeroRepública.We are seeking to enhance AeroRepúblicas
market share and profitability through a variety of initiatives, including modernizing its
fleet, integrating its route network with Copas and improving overall efficiency. We also
seek to increase customer loyalty by making further improvements at AeroRepública, such as
implementing the OnePass frequent flyer program and improving on-time performance, which
increased from 70.4% during the period from the date of our acquisition to December 31,
2005 to 80.3% during the year ended December 31, 2006.
 AeroRepública
 Unidad Especial Administrative de Aeronáutica Civil
   Industry
      26




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##### Table of Contents



2006 IATA Traffic ResultsPassengers
    
    
    
    
    
    
    PassengerCarried
    
    
    
    
    
    
    Miles(Thousands)
    
    
    Change (%)
    
    
    (Millions)
    
    
    Change (%)
    
    
    ASMs (Million)
    
    
    Change (%)
    
    
    Load FactorInternational Scheduled ServiceNorth America  Central America
    
    
    22,453
    
    
    
    7.0
    %
    
    
    35,431
    
    
    
    8.8
    %
    
    
    48,176
    
    
    
    8.0
    %
    
    
    73.5
    %North America  South America
    
    
    19,744
    
    
    
    4.8
    %
    
    
    39,505
    
    
    
    6.3
    %
    
    
    52,459
    
    
    
    2.4
    %
    
    
    75.3
    %Central America  South America
    
    
    1,485
    
    
    
    -4.5
    %
    
    
    2,465
    
    
    
    -10.6
    %
    
    
    3,520
    
    
    
    -13.3
    %
    
    
    70.0
    %Within Central America
    
    
    2,192
    
    
    
    1.3
    %
    
    
    1,153
    
    
    
    5.8
    %
    
    
    1,818
    
    
    
    6.2
    %
    
    
    63.4
    %Within South America
    
    
    9,190
    
    
    
    10.5
    %
    
    
    8,869
    
    
    
    7.1
    %
    
    
    12,504
    
    
    
    5.1
    %
    
    
    70.9
    %Domestic Scheduled ServiceCentral America
    
    
    11,000
    
    
    
    -4.2
    %
    
    
    6,700
    
    
    
    -4.2
    %
    
    
    10,472
    
    
    
    -0.3
    %
    
    
    64.0
    %South America
    
    
    38,826
    
    
    
    -3.4
    %
    
    
    19,983
    
    
    
    -3.3
    %
    
    
    28,246
    
    
    
    -5.3
    %
    
    
    70.7
    %
  GDP
    
    
    GDP per Capita2006 GDP2006 GDP
    
    
    
    
    
    
    per CapitaCurrent Prices
    
    
    2005 Real GDP
    
    
    Current Prices(US$bn)
    
    
    (% Growth)
    
    
    (US$)Brazil
    
    
    1,067.7
    
    
    
    3.7
    %
    
    
    5,716.7Argentina
    
    
    212.7
    
    
    
    8.5
    %
    
    
    5,458.0Chile
    
    
    145.2
    
    
    
    4.0
    %
    
    
    8,864.3Mexico
    
    
    840.0
    
    
    
    4.8
    %
    
    
    8,066.2Colombia
    
    
    135.1
    
    
    
    6.8
    %
    
    
    2,887.9Panama
    
    
    17.1
    
    
    
    8.1
    %
    
    
    5,210.6USA
    
    
    13,244.6
    
    
    
    3.3
    %
    
    
    44,190.5
 
 Source:
    
    International Monetary Fund, World Economic Outlook Database,
April 2007; real GDP growth calculated in local currency
     27




---



##### Table of Contents



Route Network and Schedules
 Copa
     Number of Passengers Carried
 Year Ended December 31,Region
    
    ASMs per Week
    
    
    2003
    
    
    2004
    
    
    2005North America
    
    
    26,221,945
    
    
    
    395,497
    
    
    
    487,852
    
    
    
    591,486Central America
    
    
    10,173,168
    
    
    
    741,295
    
    
    
    855,491
    
    
    
    902,267South America
    
    
    63,413,364
    
    
    
    884,298
    
    
    
    1,120,355
    
    
    
    1,363,424Caribbean
    
    
    13,893,987
    
    
    
    290,372
    
    
    
    339,975
    
    
    
    484,551
      28




---



##### Table of Contents



Revenue by Region
 Year Ended December 31,Region
    
    2004
    
    
    2005
    
    
    2006North America(1)
    
    
    16.6
    %
    
    
    17.2
    %
    
    
    19.4
    %South America
    
    
    37.2
    %
    
    
    39.6
    %
    
    
    41.5
    %Central America(2)
    
    
    34.3
    %
    
    
    31.6
    %
    
    
    29.0
    %Caribbean(3)
    
    
    11.9
    %
    
    
    11.6
    %
    
    
    10.1
    %
 
 (1)
    
    The United States, Canada and Mexico.(2)
    
    Includes Panama.(3)
    
    Cuba, Dominican Republic, Haiti, Jamaica, Puerto Rico
 AeroRepública
  Number of PassengersDepartures
    
    
    Carried During theDate Service
    
    
    Scheduled
    
    
    Year EndedDestinations Served
    
    Commenced
    
    
    per Week(1)
    
    
    December 31, 2006Barranquilla
    
    Jun 1995
    
    
    28
    
    
    
    103,502Bogotá
    
    Jun 1993
    
    
    247
    
    
    
    1,017,558Bucaramanga
    
    May 1995
    
    
    20
    
    
    
    85,156Cali
    
    Jun 1993
    
    
    67
    
    
    
    250,073Cartagena
    
    Jun 1993
    
    
    39
    
    
    
    210,211Cúcuta
    
    Nov 2005
    
    
    13
    
    
    
    41,211Leticia
    
    Nov 1993
    
    
    7
    
    
    
    37,112Medellín
    
    Oct 1994
    
    
    59
    
    
    
    238,703Montería
    
    Jul 1994
    
    
    14
    
    
    
    51,952Panama
    
    Dec 2005
    
    
    21
    
    
    
    41,243Pereira
    
    Mar 2003
    
    
    13
    
    
    
    52,811San Andrés
    
    Jun 1993
    
    
    37
    
    
    
    204,504Santa Marta
    
    Jun 1993
    
    
    15
    
    
    
    77,188
 
 (1)
    
    As of March 31, 2007.
   Comunidad Andina
 Airline Operations
 Passenger Operations
   29




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##### Table of Contents



Cargo Operations
  Pricing and Revenue Management
 Copa
   AeroRepública
  Relationship with Continental Airlines
   30




---



##### Table of Contents



Product Positioning. Clase Ejecutiva
   Code-sharing.
 Aircraft Maintenance & Flight Safety.
 Sales & Revenue Management.
 Information Technology.
 Fleet Modernization.
  31




---



##### Table of Contents



Sales, Marketing and Distribution
 Copa
 Sales and Distribution.
      Advertising and Promotional Activities.
 AeroRepública
   32




---



##### Table of Contents



Competition
          33




---



##### Table of Contents



Aircraft
 Copa
   AverageTermof Lease
    
    
    AverageNumber of Aircraft
    
    
    Remaining
    
    
    Age
    
    
    SeatingTotal
    
    
    Owned
    
    
    Leased
    
    
    (Years)
    
    
    (Years)
    
    
    CapacityBoeing 737-700
    
    
    20
    
    
    
    14
    
    
    
    6
    
    
    
    3.8
    
    
    
    4.9
    
    
    
    124Boeing 737-800
    
    
    4
    
    
    
    3
    
    
    
    1
    
    
    
    5.5
    
    
    
    3.0
    
    
    
    155Embraer 190
    
    
    6
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    1.0
    
    
    
    94Total
    
    
    30
    
    
    
    23
    
    
    
    7
    
    
    
    4.0
    
    
    
    3.9
    
    
    
    
  Aircraft Type
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012737-700
    
    
    21
    
    
    
    22
    
    
    
    22
    
    
    
    22
    
    
    
    22737-800(1)
    
    
    7
    
    
    
    8
    
    
    
    8
    
    
    
    10
    
    
    
    12Embraer 190
    
    
    15
    
    
    
    15
    
    
    
    15
    
    
    
    15
    
    
    
    15Total Fleet
    
    
    43
    
    
    
    45
    
    
    
    45
    
    
    
    47
    
    
    
    49
 (1)
    
    We have the flexibility to choose between the Boeing 737-700 or
the Boeing 737-800 aircraft for most of the 737-700 aircraft
deliveries scheduled after 2006.
  34




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##### Table of Contents




    
    They have simplified maintenance procedures.
 
    
    They require just one type of standardized training for our crews.
 
    
    They have one of the lowest operating costs in their class.
   Clase
Ejecutiva
  AeroRepública
   35




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##### Table of Contents



Maintenance
 Copa
   AeroRepública
  Safety
    36




---



##### Table of Contents



Airport Facilities
  
    
    Panamas consistently temperate climate is ideal for airport operations. For
example, in recent years Tocumen was closed and unavailable for flight operations
for a total of less than two hours per year on average
 
    
    Tocumen is the only airport in Central America with two operational runways.
Also unlike some other regional airports, we are currently not constrained by a
lack of available gates/parking positions at Tocumen, and there is ample room to
expand Tocumen.
 
    
    From Panamas central location, our Boeing 737-Next Generation can efficiently
serve long-haul destinations in South American cities such as Santiago, Chile;
Montevideo, Uruguay; Buenos Aires, Argentina; Rio de Janeiro, Brazil; and São
Paulo, Brazil as well as short-haul destinations in Central and South America.
 
    
    Travelers can generally make connections easily through Tocumen because of its
manageable size and Panamas policies accommodating in-transit passengers.
     37




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##### Table of Contents



Fuel
  Aircraft Fuel Data2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006CopaAverage price per gallon of jet
fuel into plane (excluding hedge)
(in U.S. dollars)
    
    $
    0.86
    
    
    $
    1.01
    
    
    $
    1.32
    
    
    $
    1.87
    
    
    $
    2.10Gallons consumed (in thousands)
    
    
    44,788
    
    
    
    48,444
    
    
    
    50,833
    
    
    
    58,924
    
    
    
    70,770Available seat miles (in millions)
    
    
    2,847
    
    
    
    3,226
    
    
    
    3,639
    
    
    
    4,409
    
    
    
    5,239Gallons per ASM (in hundredths)
    
    
    1.57
    
    
    
    1.50
    
    
    
    1.40
    
    
    
    1.34
    
    
    
    1.35AeroRepública(1)Average price per gallon of jet
fuel into plane (excluding hedge)
(in U.S. dollars)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2.12
    
    
    $
    2.24Gallons consumed (in thousands)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,887
    
    
    
    28,321Available seat miles (in millions)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    950
    
    
    
    1,627Gallons per ASM (in hundredths)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.88
    
    
    
    1.74
 
 (1)
    
    Since April 22, 2005.
     38




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##### Table of Contents



Insurance
  Environmental
  Regulation
 Panama
     39




---



##### Table of Contents



Antitrust regulation, enforcement
 per se
 Noise regulations effects
   40




---



##### Table of Contents



Colombia
 Unidad Especial Administrativa de Aeronáutica Civil, Aeronautica Civil.
 Comunidad Andina
 U.S.
  Authorizations and Licenses.
   41




---



##### Table of Contents



Security.
 Noise Restrictions.
  Proposed Laws and Regulations.
 Other Jurisdictions
  C. Organizational Structure
  
 
 *
    
    Includes ownership by us held through wholly-owned holding companies organized in the British
Virgin Islands.
  42




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##### Table of Contents



D. Property, Plants and Equipment
 Headquarters
  Other property
   AeroRepública
  
 Item 4A. Unresolved Staff Comments
  
 Item 5. Operating and Financial Review and Prospects
 A. Operating Results
 You should read the following discussion in conjunction with our consolidated financial
statements and the related notes and the other financial information included elsewhere in this
annual report.
   43




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##### Table of Contents



Our 2005 acquisition of AeroRepública has affected the comparability of our recent results of
operations.
 Unidad Especial Administrativa de Aeronáutica Civil
   44




---



##### Table of Contents



Regional Economic Environment
  The Preliminary Overview of the Economies of Latin America and the
Caribbean
 Revenues
      45




---



##### Table of Contents



Year Ended December 31,2004
    
    
    2005
    
    
    2006Copa SegmentCapacity (in available seat miles, in millions)
    
    
    3,639.4
    
    
    
    4,408.8
    
    
    
    5,239.1Load factor
    
    
    70.0
    %
    
    
    73.4
    %
    
    
    77.8
    %Yield (in cents)
    
    
    14.31
    
    
    
    14.41
    
    
    
    15.49AeroRepública Segment(1)Capacity (in available seat miles, in millions)
    
    
    
    
    
    
    950.5
    
    
    
    1,627.1Load factor
    
    
    
    
    
    
    62.0
    %
    
    
    57.9
    %Yield (in cents)(2)
    
    
    
    
    
    
    16.53
    
    
    
    17.79
 
 (1)
    
    Since April 22, 2005.(2)
    
    AeroRepública has not historically distinguished between revenue
passengers and non-revenue passengers. While we are implementing
systems at AeroRepública to record that information, revenue passenger
information and other statistics derived from revenue passenger data
for the year ended December 31, 2005 has been derived from estimates
that we believe to be materially accurate.
 Seasonality
  Operating Expenses
  Aircraft fuel.
  46




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##### Table of Contents



Aircraft Fuel Data2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006Copa SegmentAverage price per gallon of jet
fuel into plane (excluding hedge)
(in U.S. dollars)
    
    $
    0.86
    
    
    $
    1.01
    
    
    $
    1.32
    
    
    $
    1.87
    
    
    $
    2.10Gallons consumed (in thousands)
    
    
    44,788
    
    
    
    48,444
    
    
    
    50,833
    
    
    
    58,924
    
    
    
    70,770Available seat miles (in millions)
    
    
    2,847
    
    
    
    3,226
    
    
    
    3,639
    
    
    
    4,409
    
    
    
    5,239Gallons per ASM (in hundredths)
    
    
    1.57
    
    
    
    1.50
    
    
    
    1.40
    
    
    
    1.34
    
    
    
    1.35AeroRepública(1)Average price per gallon of jet
fuel into plane (excluding hedge)
(in U.S. dollars)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2.12
    
    
    $
    2.24Gallons consumed (in thousands)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,887
    
    
    
    28,321Available seat miles (in millions)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    950
    
    
    
    1,627Gallons per ASM (in hundredths)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.88
    
    
    
    1.74
 
 (1)
    
    Since April 22, 2005.
 Salaries and benefits.
 Passenger servicing expenses.
 Commissions.
 Maintenance, material and repair expenses.
  Aircraft rent.
  47




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##### Table of Contents



Reservations and sales expenses.
 Flight operations landing fees and other rentals
 Other
 Taxes
      Critical Accounting Policies and Estimates
   48




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##### Table of Contents



Revenue recognition.
  Frequent flyer program.
 Goodwill and indefinite-lived purchased intangible assets. Goodwill and Other Intangible Assets
  49




---



##### Table of Contents



Maintenance and repair costs.
  Recently Issued Accounting Pronouncement
  Fair Value
Measurements
 The Fair Value
Option for Financial Assets and Financial Liabilities
  50




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##### Table of Contents



Results of Operation
  Year Ended December 31,2004
    
    
    2005(1)
    
    
    2006Operating revenues:Passenger revenue
    
    
    91.2
    %
    
    
    92.6
    %
    
    
    93.9
    %Cargo, mail and other
    
    
    8.8
    %
    
    
    7.4
    %
    
    
    6.1
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Aircraft fuel
    
    
    (15.6
    )%
    
    
    (24.5
    )%
    
    
    (25.6
    )%Salaries and benefits
    
    
    (12.9
    )%
    
    
    (11.5
    )%
    
    
    (10.7
    )%Passenger servicing
    
    
    (9.8
    )%
    
    
    (8.3
    )%
    
    
    (7.6
    )%Commissions
    
    
    (7.3
    )%
    
    
    (7.4
    )%
    
    
    (6.8
    )%Reservation and sales
    
    
    (5.5
    )%
    
    
    (4.8
    )%
    
    
    (4.5
    )%Maintenance, materials and repairs
    
    
    (4.9
    )%
    
    
    (5.3
    )%
    
    
    (5.9
    )%Depreciation
    
    
    (4.8
    )%
    
    
    (3.3
    )%
    
    
    (2.9
    )%Flight operations
    
    
    (4.5
    )%
    
    
    (4.1
    )%
    
    
    (4.0
    )%Aircraft rentals
    
    
    (3.6
    )%
    
    
    (4.5
    )%
    
    
    (4.5
    )%Landing fees and other rentals
    
    
    (3.0
    )%
    
    
    (2.9
    )%
    
    
    (2.8
    )%Other
    
    
    (7.3
    )%
    
    
    (5.4
    )%
    
    
    (5.3
    )%Total
    
    
    (79.4
    )%
    
    
    (82.1
    )%
    
    
    (80.5
    )%Operating income
    
    
    20.6
    %
    
    
    17.9
    %
    
    
    19.5
    %Non-operating income (expenses):Interest expense
    
    
    (4.1
    )%
    
    
    (3.6
    )%
    
    
    (3.4
    )%Interest capitalized
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    0.2
    %Interest income
    
    
    0.4
    %
    
    
    0.6
    %
    
    
    0.9
    %Other, net
    
    
    1.5
    %
    
    
    0.1
    %
    
    
    0.0
    %Total
    
    
    (2.0
    )%
    
    
    (2.7
    )%
    
    
    (2.3
    )%Income/(loss) before income taxes
    
    
    18.6
    %
    
    
    15.2
    %
    
    
    17.2
    %Income taxes
    
    
    (1.4
    )%
    
    
    (1.6
    )%
    
    
    (1.4
    )%Net income
    
    
    17.1
    %
    
    
    13.6
    %
    
    
    15.7
    %
 
 (1)
    
    Includes results from our AeroRepública segment for the period from April 22, 2005 to December 31, 2005.
 Year 2006 Compared to Year 2005
  Operating revenue
  Copa segment operating revenue
  Passenger revenue.
  51




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##### Table of Contents



Cargo, mail and other.
 AeroRepública segment operating revenue
  Operating expenses
    Aircraft fuel.
 Salaries and benefits.
 Passenger servicing.
 Commissions.
 Maintenance, materials and repairs.
   52




---



##### Table of Contents



Copa segment operating expenses
  Year Ended December 31,
    
    
    Percent2005
    
    
    2006
    
    
    Change(in cents)Operating Expenses per ASM:Salaries and benefits
    
    
    1.33
    
    
    
    1.43
    
    
    
    7.2
    %Passenger servicing
    
    
    1.02
    
    
    
    1.03
    
    
    
    0.9
    %Commissions
    
    
    0.81
    
    
    
    0.77
    
    
    
    (4.4
    )%Reservation and sales
    
    
    0.57
    
    
    
    0.58
    
    
    
    1.3
    %Maintenance, materials and repairs
    
    
    0.48
    
    
    
    0.52
    
    
    
    8.3
    %Depreciation
    
    
    0.44
    
    
    
    0.45
    
    
    
    3.8
    %Flight operations
    
    
    0.50
    
    
    
    0.54
    
    
    
    9.2
    %Aircraft rentals
    
    
    0.50
    
    
    
    0.46
    
    
    
    (9.2
    )%Landing fees and other rentals
    
    
    0.34
    
    
    
    0.35
    
    
    
    4.8
    %Other
    
    
    0.62
    
    
    
    0.64
    
    
    
    1.9
    %Total operating expenses per ASM before
aircraft fuel
    
    
    6.62
    
    
    
    6.78
    
    
    
    2.4
    %Aircraft fuel
    
    
    2.52
    
    
    
    2.95
    
    
    
    17.1
    %Total operating expenses per ASM
    
    
    9.13
    
    
    
    9.73
    
    
    
    6.5
    %
 Aircraft fuel.
 Salaries and benefits.
 Passenger servicing.
 Commissions.
 Reservations and sales.
 Maintenance, materials and repairs.
 Depreciation.
 Aircraft rentals.
  53




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##### Table of Contents



Flight operations landing fees and other rentals.
 Other.
 AeroRepública segment operating expenses
  Non-operating income (expense)
  Copa segment non-operating income (expense)
  Interest expense.
 Interest capitalized.
 Interest income.
 Other, net.
 Year 2005 Compared to Year 2004
  Operating revenue
   54




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##### Table of Contents



Copa segment operating revenue
  Passenger revenue.
 Cargo, mail and other.
 AeroRepública segment operating revenue
  Operating expenses
    Aircraft fuel.
 Salaries and benefits.
 Passenger servicing.
 Commissions.
   55




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##### Table of Contents



Copa segment operating expenses
  Year Ended December 31,
    
    
    Percent2004
    
    
    2005
    
    
    Change(in cents)Operating Expenses per ASM:Salaries and benefits
    
    
    1.42
    
    
    
    1.33
    
    
    
    (6.2
    )%Passenger servicing
    
    
    1.08
    
    
    
    1.02
    
    
    
    (4.9
    )%Commissions
    
    
    0.80
    
    
    
    0.81
    
    
    
    1.0
    %Reservation and sales
    
    
    0.61
    
    
    
    0.57
    
    
    
    (5.6
    )%Maintenance, materials and repairs
    
    
    0.54
    
    
    
    0.48
    
    
    
    (10.8
    )%Depreciation
    
    
    0.53
    
    
    
    0.44
    
    
    
    (17.6
    )%Flight operations
    
    
    0.49
    
    
    
    0.50
    
    
    
    1.0
    %Aircraft rentals
    
    
    0.40
    
    
    
    0.50
    
    
    
    26.3
    %Landing fees and other rentals
    
    
    0.33
    
    
    
    0.34
    
    
    
    0.9
    %Other
    
    
    0.81
    
    
    
    0.62
    
    
    
    (22.4
    )%Total operating expenses per ASM before
aircraft fuel
    
    
    7.01
    
    
    
    6.62
    
    
    
    (5.5
    )%Aircraft fuel
    
    
    1.72
    
    
    
    2.52
    
    
    
    46.3
    %Total operating expenses per ASM
    
    
    8.72
    
    
    
    9.13
    
    
    
    4.7
    %
 Aircraft fuel.
 Salaries and benefits.
 Passenger servicing.
 Commissions.
 Reservations and sales.
 Maintenance, materials and repairs.
  56




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##### Table of Contents



Depreciation.
 Aircraft rentals.
 Flight operations landing fees and other rentals.
 Other.
 AeroRepública segment operating expenses
  Non-operating income (expense)
  Copa segment non-operating income (expense)
  Interest expense.
 Interest capitalized.
 Interest income.
 Other, net.
  57




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##### Table of Contents



B. Liquidity and Capital Resources
   Operating Activities
  Investing Activities
  Financing Activities
      58




---



##### Table of Contents



59




---



##### Table of Contents



Capital resources.
  C. Research and Development, Patents and Licenses, etc.
   D. Trend Information
     E. Off-balance sheet arrangements
   60




---



##### Table of Contents



F. Tabular Disclosure of Contractual Obligations
  At December 31, 2006Less than
    
    
    1-3
    
    
    3-5
    
    
    More thanTotal
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 Years(in thousands of dollars)Aircraft and engine purchase commitments
    
    
    518,691
    
    
    
    312,574
    
    
    
    206,117
    
    
    
    0
    
    
    
    0Aircraft operating leases
    
    
    172,472
    
    
    
    35,346
    
    
    
    67,264
    
    
    
    37,307
    
    
    
    32,555Other operating leases
    
    
    40,380
    
    
    
    5,317
    
    
    
    11,165
    
    
    
    9,111
    
    
    
    14,787Short-term debt and long-term debt(1)
    
    
    756,384
    
    
    
    125,422
    
    
    
    140,742
    
    
    
    132,532
    
    
    
    357,688Total
    
    
    1,487,927
    
    
    
    478,659
    
    
    
    425,288
    
    
    
    178,950
    
    
    
    405,030
 (1)
    
    Includes actual interest and estimated interest for floating-rate debt based on December 31, 2006 rates.
   
 Item 6. Directors, senior management and employees
 A. Directors and Senior Management
   Name
    
    Position
    
    AgePedro Heilbron
    
    Chief Executive Officer and Director
    
    49Stanley Motta
    
    Chairman and Director
    
    61Osvaldo Heilbron
    
    Director
    
    80Jaime Arias
    
    Director
    
    71Ricardo Alberto Arias
    
    Director
    
    67Alberto C. Motta, Jr.
    
    Director
    
    60Mark Erwin
    
    Director
    
    51Joseph Fidanque III
    
    Director
    
    40Jose Castañeda Velez
    
    Director
    
    63Roberto Artavia Loria
    
    Director
    
    47Alfredo Arias Loredo
    
    Director
    
    60
 Mr. Pedro Heilbron
  61




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##### Table of Contents



Mr. Stanley Motta
 Mr. Osvaldo Heilbron
 Mr. Jaime Arias
 Mr. Ricardo Arias
 Mr. Alberto Motta, Jr.
 Mr. Mark Erwin
 Mr. Joseph Fidanque III
 Mr. Roberto Artavia Loria
  62




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##### Table of Contents



Mr. José Castañeda Velez
 Mr. Alfredo
Arias Loredo
  Name
    
    Position
    
    AgePedro Heilbron
    
    Chief Executive Officer
    
    49Victor Vial
    
    Chief Financial Officer
    
    41Lawrence Ganse
    
    Senior Vice-President of Operations
    
    63Jorge Isaac García
    
    Vice-President, Commercial
    
    47Daniel Gunn
    
    Vice-President of Planning
    
    39Jaime Aguirre
    
    Vice President of Maintenance
    
    44Vidalia de Casado
    
    Vice President of Passenger Services
    
    50Alexander Gianareas
    
    Senior Director of Human Resources
    
    54Roberto Junguito Pombo
    
    Chief Executive Officer of AeroRepública
    
    37
 Mr. Pedro Heilbron
 Mr. Victor Vial
 Captain Lawrence Ganse
 Mr. Jorge Isaac García
 Mr. Daniel Gunn
 Mr. Jaime Aguirre
  63




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##### Table of Contents



Ms. Vidalia de Casado
 Mr. Alexander Gianareas
 Mr. Roberto Junguito Pombo
  B. Compensation
   Long Term Incentive Compensation Plan
     64




---



##### Table of Contents



C. Board Practices
    Committees of the Board of Directors
 Audit Committee.
 Compensation Committee.
 Nominating and Corporate Governance Committee.
 Independent Directors Committee.
  65




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##### Table of Contents




    
    any transactions in excess of $5 million between us and our controlling
shareholders,
 
    
    the designation of certain primary share issuances that will not be included in
the calculation of the percentage ownership pertaining to the Class B shares for
purposes of determining whether the Class A shares should be converted to voting
 shares under our Articles of Incorporation, and
 
    
    the issuance of additional Class B shares or Class C shares to ensure Copa
Airlines compliance with aviation laws and regulations.
  D. Employees
    December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006Pilots
    
    
    192
    
    
    
    220
    
    
    
    224
    
    
    
    235
    
    
    
    299Flight attendants
    
    
    330
    
    
    
    349
    
    
    
    372
    
    
    
    448
    
    
    
    514Mechanics
    
    
    203
    
    
    
    209
    
    
    
    189
    
    
    
    200
    
    
    
    155Customer service agents, reservation
agents, ramp and other
    
    
    1,299
    
    
    
    1,382
    
    
    
    1,470
    
    
    
    1,626
    
    
    
    1,861Management and clerical
    
    
    429
    
    
    
    480
    
    
    
    499
    
    
    
    587
    
    
    
    675Total employees
    
    
    2,453
    
    
    
    2,640
    
    
    
    2,754
    
    
    
    3,096
    
    
    
    3,504
   66




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Asociación Colombiana de Aviadores Civiles Asociación Colombiana de Auxiliares de Vuelo
 E. Share Ownership
  
 Item 7. Major Shareholders and Related Party Transactions
 A. Major Shareholders
  Class A SharesBeneficially OwnedShares
    
    
    (%)(1)CIASA(2)
    
    
    
    
    
    
    Continental(3)
    
    
    4,375,000
    
    
    
    14.1
    %Executive officers and directors as a group (19 persons)
    
    
    771,725
    
    
    
    2.5
    %Others
    
    
    25,820,669
    
    
    
    83.4
    %Total
    
    
    30,967,394
    
    
    
    100
    %
 
 (1)
    
    Based on a total of
30,967,394 Class A shares issued.(2)
    
    CIASA owns 100% of the Class B shares of Copa Holdings, representing 29.2% of our total capital stock.(3)
    
    Based on a Schedule 13G filed with the Securities and Exchange Commission, dated July 5, 2006, in
which Continental reported that it had sole voting and dispositive power over 4,375,000 of Class A
shares.
  67




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B. Related Party Transactions
 Shareholders Agreement
  
    
    a right of each of CIASA and Continental to designate a certain number of
directors to our board of directors for so long as they hold a certain amount of
our common stock. Of the 11 members of our board, CIASA initially had the right to
designate six directors and Continental initially had the right to designate two
directors, with the remaining three directors being independent under the rules
of the New York Stock Exchange. Continental has the right to designate one of our
directors and CIASA has the right to designate seven of our directors;
 
    
    certain limitations on transfers of our common stock by CIASA or Continental;
 
    
    subject to certain exceptions, a right of first offer in favor of CIASA to
purchase any shares of our common stock Continental proposes to sell to any third
party; and
 
    
    the ability of Continental to tag-along their shares of our common stock to
certain sales of common stock by CIASA to non-Panamanians or, in the case of
certain sales of Class B stock by CIASA to Panamanians, to receive additional
registration rights with respect to the shares they would otherwise have been able
to sell.
  68




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Registration Rights Agreement
   Commercial Agreements with Continental
  Alliance Agreement.
  69




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Services Agreement.
 Frequent Flyer Participation Agreement.
 Trademark License Agreement.
 Agreements with our controlling shareholders and their affiliates
  Banco Continental de Panama, S.A.
    70




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##### Table of Contents



ASSA Compañía de Seguros, S.A.
  Petróleos Delta, S.A.
  Desarollo Inmobiliario del Este, S.A.
  Galindo, Arias & Lopez
  Other Transactions
      71




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C. Interests of Experts and Counsel
  
 Item 8. Financial Information
 A. Consolidated Statements and Other Financial Information
  Legal Proceedings
  Dividends and Dividend Policy
    B. Significant Changes
   72




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Item 9. The Offer and Listing
 A. Offer and Listing Details
  Low
    
    
    High2005Annual(1)
    
    
    21.95
    
    
    
    27.402006Annual
    
    
    20.31
    
    
    
    49.05First quarter
    
    
    20.31
    
    
    
    27.10Second quarter
    
    
    20.95
    
    
    
    24.25Third quarter
    
    
    21.53
    
    
    
    35.22Fourth quarter
    
    
    33.15
    
    
    
    49.05Last Six MonthsJanuary 2007
    
    
    46.70
    
    
    
    56.50February 2007
    
    
    53.47
    
    
    
    66.47March 2007
    
    
    49.50
    
    
    
    59.00April 2007
    
    
    50.54
    
    
    
    63.23May 2007
    
    
    59.04
    
    
    
    70.94June 2007
    
    
    59.33
    
    
    
    71.00
 
 (1)
    
    Period beginning December 14, 2005 through December 31, 2005.
 B. Plan of Distribution
  C. Markets
  Comisión Nacional de Valores
 NYSE Standards
    
    Our Corporate Governance PracticeDirector Independence.
Majority of board of directors must be
independent. §303A.01
    
    Panamanian corporate governance
standards recommend that one in
every five directors should be an
independent director. The
criteria for determining
independence under the Panamanian
corporate governance standards
differs from the NYSE rules. In
Panama, a director would be
considered independent as long as
the director does not directly or
indirectly own 5% or more of the
issued and outstanding voting
shares of the company, is not
involved in the daily management
of the company and is not a
spouse or related to the second
degree by blood or marriage to
the persons named above.
  73




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NYSE Standards
    
    Our Corporate Governance PracticeOur Articles of Incorporation
require us to have three
independent directors as defined
under the NYSE rules.Executive Sessions.Non-management
directors must meet regularly in
executive sessions without management.
Independent directors should meet alone
in an executive session at least once a
year. §303A.03
    
    There are no mandatory
requirements under Panamanian law
that a company should hold, and
we currently do not hold, such
executive sessions.Nominating/corporate governance
committee.Nominating/corporate
governance committee of independent
directors is required. The committee
must have a charter specifying the
purpose, duties and evaluation
procedures of the committee. §303A.04
    
    Panamanian corporate governance
standards recommend that
registered companies have a
nominating committee composed of
three members of the board of
directors, at least one of which
should be an independent
director, plus the chief
executive officer and the chief
financial officer. In Panama, the
majority of public corporations
do not have a nominating or
corporate governance committee.
Our Articles of Incorporation
require that we maintain a
Nominating and Corporate
Governance Committee with at
least one independent director
until the first shareholders
meeting to elect directors after
such time as the Class A shares
are entitled to full voting
rights.Compensation committee.Compensation
committee of independent directors is
required, which must approve executive
officer compensation. The committee must
have a charter specifying the purpose,
duties and evaluation procedures of the
committee. §303A.05
    
    Panamanian corporate governance
standards recommend that the
compensation of executives and
directors be overseen by the
nominating committee but do not
otherwise address the need for a
compensation committee. 
While we maintain a compensation
committee that operates under a
charter as described by the NYSE
governance standards, currently
one of the members of that
committee is independent.Equity compensation plans.Equity
compensation plans require shareholder
approval, subject to limited exemptions.
    
    Under Panamanian law, shareholder
approval is not required for
equity compensation plans.Code of Ethics.Corporate
governance guidelines and a code of
business conduct and ethics is required,
with disclosure of any waiver for
directors or executive officers.
§303A.10
    
    Panamanian corporate governance
standards do not require the
adoption of specific guidelines
as contemplated by the NYSE
standards, although they do
require that companies disclose
differences between their
practices and a list of specified
practices recommended by the CNV. 
We have not adopted a set of
corporate governance guidelines
as contemplated by the NYSE,
although we will be required to
comply with the disclosure
requirement of the CNV.Panamanian corporate governance
standards recommend that
registered companies adopt a code
of ethics covering such topics as
its ethical and moral principles,
how to address conflicts of
interest, the appropriate use of
resources, obligations to inform
of acts of corruption and
mechanism to enforce the
compliance with established rules
of conduct.
  74




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D. Selling Shareholders
  E. Dilution
  F. Expenses of the Issue
  
 Item 10. Additional Information
 A. Share Capital
  B. Memorandum and Articles of Association
 (sociedad anónima)
 Objects and Purposes
  Description of Capital Stock
 The following is a summary of the material terms of Copa Holdings capital stock and a brief
summary of certain significant provisions of Copa Holdings Articles of Incorporation. This
description contains all material information concerning the common stock but does not purport to
be complete. For additional information regarding the common stock, reference is made to the
Articles of Incorporation, a copy of which has been filed as an exhibit to the registration
statement of which this prospectus forms a part.
 For purposes of this section only, reference to our or the company shall refer only to
Copa Holdings and references to Panamanians shall refer to those entities or natural persons that
are considered Panamanian nationals under the Panamanian Aviation Act, as it may be amended or
interpreted.
 Common Stock
   75




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Class A Shares
  
    
    a transformation of Copa Holdings into another corporate type;
 
    
    a merger, consolidation or spin-off of Copa Holdings;
 
    
    a change of corporate purpose;
 
    
    voluntarily delisting Class A shares from the NYSE;
 
    
    approving the nomination of Independent Directors nominated by our board of
directors Nominating and Corporate Governance Committee following our next annual
general shareholders meeting; and
 
    
    any amendment to the foregoing special voting provisions adversely affecting the
rights and privileges of the Class A shares.
    Class B Shares
  Class C Shares
   76




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Restrictions on Transfer of Common Stock; Conversion of Class B Shares
   Tag-along Rights
  Aviation Rights Protections
    77




---



##### Table of Contents




    
    authorize the issuance of additional Class B shares to Panamanians at a price
determined by the Independent Directors to reflect the current market value of such
 shares or
 
    
    authorize the issuance to Class B shareholders such number of Class C shares as the
Independent Directors Committee, or the board of directors if applicable, deems
necessary and with such other terms and conditions established by the Independent
Directors Committee that do not confer economic rights on the Class C shares.
 Dividends
  Shareholder Meetings
 Ordinary Meetings
  Extraordinary Meetings
  Vote required
  Notice and Location
    78




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##### Table of Contents



Quorum
  Proxy Representation
  Other Shareholder Rights
    Listing
  Transfer Agent and Registrar
  Summary of Significant Differences between Shareholders Rights and Other Corporate Governance
Matters Under Panamanian Corporation Law and Delaware Corporation Law
 sociedad anónima
  79




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##### Table of Contents



Panama
    
    DelawareDirectorsConflict of Interest
Transactions.
Transactions
involving a
Panamanian
corporation and an
interested director
or officer are
initially subject to
the approval of the
board of directors.
    
    Conflict of Interest Transactions. Transactions
involving a Delaware corporation and an interested
director of that corporation are generally
permitted if:At the next
shareholders
meeting, shareholders
will then have the
right to disapprove
the board of
directors decision
and to decide to take
legal actions against
the directors or
officers who voted in
favor of the
transaction.
    
    (1) the material facts as to the interested
directors relationship or interest are disclosed
and a majority of disinterested directors approve
the transaction; 
(2) the material facts are disclosed as to the
interested directors relationship or interest and
the stockholders approve the transaction; or(3) the transaction is fair to the corporation at
the time it is authorized by the board of
directors, a committee of the board of directors or
the stockholders.Terms. Panamanian law
does not set limits
on the length of the
terms that a director
may serve. Staggered
terms are allowed but
not required.
    
    Terms. The Delaware General Corporation Law
generally provides for a one-year term for
directors. However, the directorships may be
divided into up to three classes with up to
three-year terms, with the years for each class
expiring in different years, if permitted by the
articles of incorporation, an initial by-law or a
by-law adopted by the shareholders.Number. The board of
directors must
consist of a minimum
of three members,
which could be
natural persons or
legal entities.
    
    Number. The board of directors must consist of a
minimum of one member.Authority to take
Actions. In general,
a simple majority of
the board of
directors is
necessary and
sufficient to take
any action on behalf
of the board of
directors.
    
    Authority to take Actions. The articles of
incorporation or by-laws can establish certain
actions that require the approval of more than a
majority of directors.Shareholder Meetings and Voting RightsQuorum. The quorum
for shareholder
meetings must be set
by the articles of
incorporation or the
by-laws. If the
articles of
incorporation and the
notice for a given
meeting so provide,
if quorum is not met
a new meeting can be
immediately called
and quorum shall
consist of those
present at such new
meeting.
    
    Quorum. For stock corporations, the articles of
incorporation or bylaws may specify the number to
constitute a quorum but in no event shall a quorum
consist of less than one-third of shares entitled
to vote at a meeting. In the absence of such
specifications, a majority of shares entitled to
vote shall constitute a quorum.Action by Written
Consent. Panamanian
law does not permit
shareholder action
without formally
calling a meeting.
    
    Action by Written Consent. Unless otherwise
provided in the articles of incorporation, any
action required or permitted to be taken at any
annual meeting or special meeting of stockholders
of a corporation may be taken without a meeting,
without prior notice and without a vote, if a
consent or consents in writing, setting forth the
action to be so taken, is signed by the holders of
outstanding shares having not less than the minimum
number of votes that would be necessary to
authorize or take such action at a meeting at which
all shares entitled to vote thereon were present
and noted.
  80




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##### Table of Contents



Panama
    
    DelawareOther Shareholder RightsShareholder
Proposals.
Shareholders
representing 5% of
the issued and
outstanding capital
of the corporation
have the right to
require a judge to
call a general
shareholders meeting
and to propose the
matters for vote.
    
    Shareholder Proposals. Delaware law does not
specifically grant shareholders the right to bring
business before an annual or special meeting. If a
Delaware corporation is subject to the SECs proxy
rules, a shareholder who owns at least $2,000 in
market value, or 1% of the corporations securities
entitled to vote, may propose a matter for a vote
at an annual or special meeting in accordance with
those rules.Appraisal Rights.
Shareholders of
Panamanian
corporation do not
have the right to
demand payment in
cash of the
judicially determined
fair value of their
shares in connection
with a merger or
consolidation
involving the
corporation.
Nevertheless, in a
merger, the majority
of shareholders could
approve the total or
partial distribution
of cash, instead of
shares, of the
surviving entity.
    
    Appraisal Rights. Delaware law affords shareholders
in certain cases the right to demand payment in
cash of the judicially-determined fair value of
their shares in connection with a merger or
consolidation involving their corporation. However,
no appraisal rights are available if, among other
things and subject to certain exceptions, such
shares were listed on a national securities
exchange or designated national market system or
such shares were held of record by more than 2,000
holders.Shareholder
Derivative Actions.
Any shareholder, with
the consent of the
majority of the
shareholders, can sue
on behalf of the
corporation, the
directors of the
corporation for a
breach of their
duties of care and
loyalty to the
corporation or a
violation of the law,
the articles of
incorporation or the
by-laws.
    
    Shareholder Derivative Actions. Subject to certain
requirements that a shareholder make prior demand
on the board of directors or have an excuse not to
make such demand, a shareholder may bring a
derivative action on behalf of the corporation to
enforce the rights of the corporation against
officers, directors and third parties. An
individual may also commence a class action suit on
behalf of himself and other similarly-situated
stockholders if the requirements for maintaining a
class action under the Delaware General Corporation
Law have been met. Subject to equitable principles,
a three-year period of limitations generally
applies to such shareholder suits against officers
and directors.Inspection of
Corporate Records.
Shareholders
representing at least
5% of the issued and
outstanding shares of
the corporation have
the right to require
a judge to appoint an
independent auditor
to examine the
corporate accounting
books, the background
of the companys
incorporation or its
operation.
    
    Inspection of Corporate Records. A shareholder may
inspect or obtain copies of a corporations
shareholder list and its other books and records
for any purpose reasonably related to a persons
interest as a shareholder.
  81




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Panama
    
    DelawareAnti-takeover ProvisionsPanamanian
corporations may
include in their
articles of
incorporation or
by-laws classified
board and
super-majority
provisions.
    
    Delaware corporations may have a classified board,
super-majority voting and shareholders rights
plan.Panamanian
corporation laws
anti-takeover
provisions apply only
to companies that
are(1) registered
with the CNV for a
period of six months
before the public
offering,(2) have
over 3,000
shareholders, and(3)
have a permanent
office in Panama with
full time employees
and investments in
the country for more
than $1,000,000.
    
    Unless Delaware corporations specifically elect
otherwise, Delaware corporations may not enter into
a business combination, including mergers, sales
and leases of assets, issuances of securities and
similar transactions, with an interested
stockholder, or one that beneficially owns 15% or
more of a corporations voting stock, within three
years of such person becoming an interested
shareholder unless:These provisions are
triggered when a
buyer makes a public
offer to acquire 5%
or more of any class
of shares with a
market value of at
least $5,000,000. In
sum, the buyer must
deliver to the
corporation a
complete and accurate
statement that
includes(1) the name
of the company, the
number of the shares
that the buyer
intends to acquire
and the purchase
price;(2) the
identity and
background of the
person acquiring the
shares;(3) the source
and amount of the
funds or other goods
that will be used to
pay the purchase
price;(4) the plans
or project the buyer
has once it has
acquired the control
of the company;(5)
the number of shares
of the company that
the buyer already has
or is a beneficiary
of and those owned by
any of its directors,
officers,
subsidiaries, or
partners or the same,
and any transactions
made regarding the
shares in the last 60
days;(6) contracts,
agreements, business
relations or
negotiations
regarding securities
issued by the company
in which the buyer is
a party;(7) contract,
agreements, business
relations or
negotiations between
the buyer and any
director, officer or
beneficiary of the
securities; and(8)
any other significant
information. This
declaration will be
accompanied by, among
other things, a copy
of the buyers
financial statements.
    
    (1) the transaction that will cause the person to
become an interested shareholder is approved by the
board of directors of the target prior to the
transactions; 
(2) after the completion of the transaction in
which the person becomes an interested shareholder,
the interested shareholder holds at least 85% of
the voting stock of the corporation not including
shares owned by persons who are directors and also
officers of interested shareholders and shares
owned by specified employee benefit plans; or 
(3) after the person becomes an interested
shareholder, the business combination is approved
by the board of directors of the corporation and
holders of at least 66.67% of the outstanding
voting stock, excluding shares held by the
interested shareholder.If the board of
directors believes
that the statement
does not contain all
required information
or that the statement
is inaccurate, the
board of directors
must send the
statement to the CNV
within 45 days from
the buyers initial
delivery of the
statement to the CNV.
The CNV may then hold
a public hearing to
determine if the
information is
accurate and complete
and if the buyer has
complied with the
legal requirements.
The CNV may also
start an inquiry into
the case, having the
power to decide
whether or not the
offer may be made.Regardless of the
above, the board of
directors has the
authority to submit
the offer to the
consideration of the
shareholders. The
board should only
convene a
shareholders meeting
when it deems the
statement delivered
by the offeror to be
complete and
accurate. If
convened, the
shareholders meeting
should take place
within the next 30
days. At the
shareholders
meeting, two-thirds
of the holders of the
issued and
outstanding shares of
each class of shares
of the corporation
with a right to vote
must approve the
offer and the offer
is to be executed
within 60 days from
the shareholders
approval. If the
board decides not to
convene the
shareholders meeting
within 15 days
following the receipt
of a complete and
accurate statement
from the offeror,
shares may then be
purchased. In all
cases, the purchase
of shares can take
place only if it is
not prohibited by an
administrative or
judicial order or
injunction.The law also
establishes some
actions or recourses
of the sellers
against the buyer in
cases the offer is
made in contravention
of the law.
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Panama
    
    DelawarePreviously Acquired RightsIn no event can the
vote of the majority
shareholders deprive
the shareholders of a
corporation of
previously-acquired
rights. Panamanian
jurisprudence and
doctrine has
established that the
majority shareholders
cannot amend the
articles of
incorporation and
deprive minority
shareholders of
previously-acquired
rights nor impose
upon them an
agreement that is
contrary to those
articles of
incorporation.
    
    No comparable provisions exist under Delaware law.Once a share is
issued, the
shareholders become
entitled to the
rights established in
the articles of
incorporation and
such rights cannot be
taken away,
diminished nor
extinguished without
the express consent
of the shareholders
entitled to such
rights. If by
amending the articles
of incorporation, the
rights granted to a
class of shareholders
is somehow altered or
modified to their
disadvantage, those
shareholders will
need to approve the
amendment
unanimously.
 C. Material Contracts
 Commercial Agreements with Continental Airlines
  Alliance Agreement between Continental and Copa Airlines.
 Services Agreement between Continental and Copa Airlines.
  83




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##### Table of Contents



Frequent Flyer Participation Agreement between Continental and Copa Airlines.
 Trademark License Agreement between Continental and Copa Airlines.
 Aircraft General Terms Agreement between The Boeing Company and Copa Airlines
  Purchase Agreement between Empresa Brasileira de Aeronautica, S.A. and Copa Airlines
  Purchase Agreement between Empresa Brasileira de Aeronautica, S.A. and Copa Holdings, S.A.
  D. Exchange Controls
  E. Taxation
 United States
  
    
    a bank;
 
    
    a dealer in securities or currencies;
 
    
    a financial institution;
  84




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##### Table of Contents




    
    a regulated investment company;
 
    
    a real estate investment trust;
 
    
    an insurance company;
 
    
    a tax-exempt organization;
 
    
    a person holding our Class A shares as part of a hedging, integrated or conversion
transaction, a constructive sale or a straddle;
 
    
    a trader in securities that has elected the mark-to-market method of accounting for your securities;
 
    
    a person liable for alternative minimum tax;
 
    
    a person who owns 10% or more of our voting stock;
 
    
    a partnership or other pass-through entity for United States federal income tax purposes; or
 
    
    a person whose functional currency is not the United States dollar.
  If you are considering the purchase, ownership or disposition of our Class A shares, you
should consult your own tax advisors concerning the United States federal income tax consequences
to you in light of your particular situation as well as any consequences arising under the laws of
any other taxing jurisdiction.
  
    
    an individual citizen or resident of the United States;
 
    
    a corporation (or other entity treated as a corporation for United States federal
income tax purposes) created or organized in or under the laws of the United States,
any state thereof or the District of Columbia;
 
    
    an estate the income of which is subject to United States federal income taxation
regardless of its source; or
 
    
    a trust if it (1) is subject to the primary supervision of a court within the United
States and one or more United States persons have the authority to control all
substantial decisions of the trust or (2) has a valid election in effect under
applicable United States Treasury regulations to be treated as a United States person.
 Taxation of Dividends
   85




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
    
    have held Class A shares for less than a specified minimum period during which you
are not protected from risk of loss, or
 
    
    are obligated to make payments related to the dividends,
   Passive Foreign Investment Company
  Taxation of Capital Gains
   86




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##### Table of Contents



Information reporting and backup withholding
   Panamanian Taxation
  General principles
  Taxation of dividends
  Taxation of capital gains
  Other Panamanian taxes
  F. Dividends and Paying Agents
  G. Statement by Experts
   87




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##### Table of Contents



H. Documents on Display
   I. Subsidiary Information
  
 Item 11. Quantitative and Qualitative Disclosures about Market Risk
  Aircraft Fuel.
 Interest.
 Foreign Currencies.
  88




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##### Table of Contents



2006 Revenues and Expenses Breakdown by Currency
 Revenue
    
    
    ExpenseArgentinean Peso
    
    
    4.5
    %
    
    
    2.1
    %Brazilian Real
    
    
    6.4
    %
    
    
    3.3
    %Chilean Peso
    
    
    3.5
    %
    
    
    1.6
    %Colombian Peso
    
    
    25.4
    %
    
    
    13.5
    %Costa Rican Colon.
    
    
    3.4
    %
    
    
    1.6
    %Mexican Peso
    
    
    4.1
    %
    
    
    1.9
    %U.S. Dollar
    
    
    41.2
    %
    
    
    70.9
    %Venezuelan Bolivar
    
    
    4.0
    %
    
    
    1.7
    %Other(1)
    
    
    7.6
    %
    
    
    3.4
    %
 
 (1)
    
    Dominican Peso, Euro, Guatemalan Quetzal, Jamaican Dollar, Honduran Lempira, Haitian Gourde, Uruguayan Peso
 
 Item 12. Description of Securities Other than Equity Securities
   89




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##### Table of Contents



PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15. Controls and Procedures
 Disclosure controls and procedures
  Managements Report on Internal Control over Financial Reporting
     Changes in internal control
   90




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
       /s/ Ernst and Young 
  91




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##### Table of Contents



Item 16. Reserved
 
 Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
  
 Item 16C. Principal Accountant Fees and Services
  2005
    
    
    2006Audit Fees
    
    $
    1,717,003
    
    
    $
    959,428Audit-Related Fees
    
    
    
    
    
    
    Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    Total
    
    $
    1,717,003
    
    
    $
    959,428
 Audit Fees
   Audit-Related Fees
  Tax Fees
  All Other Fees
  Pre-Approval Policies and Procedures
 de minimis de minimis
  92




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##### Table of Contents



Item 16D. Exemptions from the Listing Standards for Audit Committees
  
 Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers
  PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  
 Item 19. Exhibits
 1.1**
    
    English translation of the Articles of Incorporation (Pacto Social) of the Registrant2.1*
    
    Form of Second Amended and Restated Shareholders Agreement among Copa Holdings, S.A., Corporación
de Inversiones Aéreas, S.A. and Continental Airlines, Inc.2.2*
    
    Form of Amended and Restated Registration Rights Agreement among Copa Holdings, S.A., Corporación
de Inversiones Aéreas, S.A. and Continental Airlines, Inc.10.1**
    
    Aircraft Lease Agreement, dated as of October 1, 1998, between First Security Bank and Compañía
Panameña de Aviación, S.A., in respect of Boeing Model 737-71Q Aircraft, Serial No. 2904710.2**
    
    Letter Agreement dated as of November 6, 1998 amending Aircraft Lease Agreement, dated October 1,
1998, between First Security Bank and Compañía Panameña de Aviación, S.A., in respect of One Boeing
Model 737-71Q Aircraft, Manufacturers Serial No. 2904710.3**
    
    Aircraft Lease Amendment Agreement dated as of May 21, 2004 to Aircraft Lease Agreement, dated
October 1, 1998, between First Security Bank and Compañía Panameña de Aviación, S.A., in respect of
Boeing Model 737-71Q Aircraft, Serial No. 2904710.4**
    
    Aircraft Lease Agreement, dated as of October 1, 1998, between First Security Bank and Compañía
Panameña de Aviación, S.A., in respect of Boeing Model 737-71Q Aircraft, Serial No. 2904810.5**
    
    Letter Agreement dated as of November 6, 1998 amending Aircraft Lease Agreement, dated as of
October 1, 1998, between First Security Bank and Compañía Panameña de Aviación, S.A., in respect of
Boeing Model 737-71Q Aircraft, Serial No. 2904810.6**
    
    Aircraft Lease Amendment Agreement dated as of May 21, 2003 to Aircraft Lease Agreement, dated
October 1, 1998, between First Security Bank and Compañía Panameña de Aviación, S.A., in respect of
Boeing Model 737-71Q Aircraft, Serial No. 2904810.7**
    
    Aircraft Lease Agreement, dated as of November 18, 1998, between Aviation Financial Services Inc.
and Compañía Panameña de Aviación, S.A., Boeing Model 737-700 Aircraft, Serial No. 2860710.8**
    
    Letter Agreement No. 1 dated as of November 18, 1998 to Aircraft Lease Agreement, dated November
18, 1998, between Aviation Financial Services Inc. and Compañía Panameña de Aviación, S.A., Boeing
Model 737-700 Aircraft, Serial No. 2860710.9**
    
    Letter Agreement No. 2 dated as of March 8, 1999 to Aircraft Lease Agreement, dated November 18,
1998, between Aviation Financial Services Inc. and Compañía Panameña de Aviación, S.A., Boeing
Model 737-700 Aircraft, Serial No. 28607
  93




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##### Table of Contents



10.10**
    
    Lease Extension and Amendment Agreement dated as of April 30, 2003, to Aircraft Lease Agreement,
dated November 18, 1998, between Aviation Financial Services Inc. and Compañía Panameña de
Aviación, S.A., Boeing Model 737-700 Aircraft, Serial No. 2860710.11**
    
    Aircraft Lease Agreement, dated as of November 18, 1998, between Aviation Financial Services Inc.
and Compañía Panameña de Aviación, S.A., Boeing Model 737-700 Aircraft, Serial No. 3004910.12**
    
    Letter Agreement No. 1 dated as of November 18, 1998 to Aircraft Lease Agreement, dated November
18, 1998, between Aviation Financial Services Inc. and Compañía Panameña de Aviación, S.A., Boeing
Model 737-700 Aircraft, Serial No. 3004910.13**
    
    Letter Agreement No. 2 dated as of March 8, 1999 to Aircraft Lease Agreement, dated November 18,
1998, between Aviation Financial Services Inc. and Compañía Panameña de Aviación, S.A., Boeing
Model 737-700 Aircraft, Serial No. 3004910.14**
    
    Lease Extension and Amendment Agreement dated as of April 30, 2003, to Aircraft Lease Agreement,
dated November 18, 1998, between Aviation Financial Services Inc. and Compañía Panameña de
Aviación, S.A., Boeing Model 737-700 Aircraft, Serial No. 3004910.15**
    
    Aircraft Lease Agreement, dated as of November 30, 2003, between International Lease Finance
Corporation and Compañía Panameña de Aviación, S.A., New B737-700 or 800, Serial No. 3067610.16**
    
    Aircraft Lease Agreement, dated as of March 4, 2004, between International Lease Finance
Corporation and Compañía Panameña de Aviación, S.A., New B737-700 or 800, Serial No. 3280010.17**
    
    Aircraft Lease Agreement dated as of December 23, 2004, between Wells Fargo Bank Northwest, N.A.
and Compañía Panameña de Aviación, S.A., in respect of Boeing B737-800 Aircraft, Serial No. 2967010.18**
    
    Embraer 190LR Purchase Agreement DCT-006/2003 dated as of May 2003 between Embraer Empresa
Brasileira de Aeronáutica S.A. and Regional Aircraft Holdings Ltd.10.19**
    
    Letter Agreement DCT-007/2003 between EmbraerEmpresa Brasileira de Aeronáutica S.A. and Regional
Aircraft Holdings Ltd., relating to Purchase Agreement DCT-006/200310.20**
    
    Letter Agreement DCT-008/2003 between EmbraerEmpresa Brasileira de Aeronáutica S.A. and Regional
Aircraft Holdings Ltd., relating to Purchase Agreement DCT-006/200310.21*
    
    Embraer 190 Purchase Agreement COM 0028-06 dated February 2006 between EmbraerEmpresa Brasileira
de Aeronáutica S.A. and Copa Holdings, S.A. relating to Embraer 190LR aircraft10.22*
    
    Letter Agreement COM 0029-06 to the Embraer Agreement dated February 2006 between EmbraerEmpresa
Brasileira de Aeronáutica S.A. and Copa Holdings, S.A. relating to Embraer 190LR aircraft10.23**
    
    Aircraft General Terms Agreement, dated November 25, 1998, between The Boeing Company and Copa
Holdings, S.A.10.24**
    
    Purchase Agreement Number 2191, dated November 25, 1998, between The Boeing Company and Copa
Holdings, S.A., Inc. relating to Boeing Model 737-7V3 & 737-8V3 Aircraft10.25**
    
    Supplemental Agreement No. 1 dated as of June 29, 2001 to Purchase Agreement Number 2191 between
The Boeing Company and Copa Holdings, S.A.10.26**
    
    Supplemental Agreement No. 2 dated as of December 21, 2001 to Purchase Agreement Number 2191
between The Boeing Company and Copa Holdings, S.A.10.27**
    
    Supplemental Agreement No. 3 dated as of June 14, 2002 to Purchase Agreement Number 2191 between
The Boeing Company and Copa Holdings, S.A.10.28**
    
    Supplemental Agreement No. 4 dated as of December 20, 2002 to Purchase Agreement Number 2191
between The Boeing Company and Copa Holdings, S.A.10.29**
    
    Supplemental Agreement No. 5 dated as of October 31, 2003 to Purchase Agreement Number 2191 between
The Boeing Company and Copa Holdings, S.A.10.30**
    
    Supplemental Agreement No. 6 dated as of September 9, 2004 to Purchase Agreement Number 2191
between The Boeing Company and Copa Holdings, S.A.
  94




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##### Table of Contents



10.31**
    
    Supplemental Agreement No. 7 dated as of December 9, 2004 to Purchase Agreement Number 2191 between
The Boeing Company and Copa Holdings, S.A.10.32**
    
    Supplemental Agreement No. 8 dated as of April 15, 2005 to Purchase Agreement Number 2191 between
The Boeing Company and Copa Holdings, S.A.10.33*
    
    Supplemental Agreement No. 9 dated as of March 16, 2006 to the Boeing Purchase Agreement Number
2191 dated November 25, 1998 between the Boeing Company and Copa Holdings, S.A.10.34*
    
    Supplemental Agreement No. 10 dated as of May 8, 2006 to the Boeing Purchase Agreement Number 2191
dated November 25, 1998 between the Boeing Company and Copa Holdings, S.A.10.35**
    
    Maintenance Cost per Hour Engine Service Agreement, dated March 5, 2003, between G.E. Engine
Services, Inc. and Copa Holdings, S.A.10.36**
    
    English translation of Aviation Fuel Supply Agreement, dated July 18, 2005, between Petróleos
Delta, S.A. and Compañía Panameña de Aviación, S.A.10.37**
    
    Form of Guaranteed Loan Agreement10.38**
    
    Form of Amended and Restated Alliance Agreement between Continental Airlines, Inc. and Compañía
Panameña de Aviación, S.A.10.39**
    
    Form of Amended and Restated Services Agreement between Continental Airlines, Inc. and Compañía
Panameña de Aviación, S.A.10.40**
    
    Form of Amended and Restated Frequent Flyer Program Participation Agreement10.41**
    
    Form of Copa Holdings, S.A. 2005 Stock Incentive Plan10.42**
    
    Form of Copa Holdings, S.A. Restricted Stock Award Agreement10.43**
    
    Form of Indemnification Agreement with the Registrants directors10.44
    
    Supplemental Agreement No. 11 dated as of August 30, 2006 to the Boeing Purchase Agreement Number
2191 dated November 25, 1998 between the Boeing Company and Copa Holdings, S.A.10.45
    
    Supplemental Agreement No. 12 dated as of February 26, 2007 to the Boeing Purchase Agreement Number
2191 dated November 25, 1998 between the Boeing Company and Copa Holdings, S.A.10.46
    
    Supplemental Agreement No. 13 dated as of April 23, 2007 to the Boeing Purchase Agreement Number
2191 dated November 25, 1998 between the Boeing Company and Copa Holdings, S.A.12.1
    
    Certification of the Chief Executive Officer, pursuant to Rules 13a-14 and 15d-14 under the
Securities Exchange Act of 1934.12.2
    
    Certification of the Chief Financial Officer, pursuant to Rules 13a-14 and 15d-14 under the
Securities Exchange Act of 1934.13.1
    
    Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.13.2
    
    Certification of the Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.21.1**
    
    Subsidiaries of the Registrant
 
 *
    
    Previously filed with the SEC as an exhibit and incorporated by reference from
our Registration Statement on Form F-1, filed June 15, 2006, File No.
333-135031.**
    
    Previously filed with the SEC as an exhibit and incorporated by reference from
our Registration Statement on Form F-1, filed November 28, 2005, as amended on
December 1, 2005 and December 13, 2005, File No. 333-129967.
    
    The Registrant was granted confidential treatment for portions of this exhibit.
    
    The Registrant has requested
confidential treatment for portions of this exhibit.
  95




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##### Table of Contents



SIGNATURES
  COPA HOLDINGS, S.A.By:

/s/
Pedro HeilbronName:
    Pedro HeilbronTitle:
    Chief Executive Officer   96




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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PagesAudited Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    2Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    
    3Consolidated Statements of Income for each of the three years
in the period ended December 31, 2006
    
    
    5Consolidated Statements of Shareholders Equity for each of the three years
in the period ended December 31, 2006
    
    
    6Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 2006
    
    
    7Notes to Consolidated Financial Statements
    
    
    8
  F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
  F-2




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In US$ thousands, except share and per share data)
 As of December 31,2006
    
    
    2005ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    169,880
    
    
    $
    94,106Short-term investments
    
    
    27,500
    
    
    
    20,384Total cash, cash equivalents and short-term investments
    
    
    197,380
    
    
    
    114,490Accounts receivable, net of allowance for doubtful accounts of
of $7,305 and $4,911 as of December 31, 2006 and 2005,
respectively
    
    
    60,319
    
    
    
    46,377Accounts receivable from related parties
    
    
    1,818
    
    
    
    156Expendable parts and supplies, net of allowance for
obsolescence of
of $21 and $9 as of December 31, 2006 and 2005, respectively
    
    
    8,667
    
    
    
    4,108Prepaid expenses
    
    
    16,590
    
    
    
    15,402Other current assets
    
    
    5,877
    
    
    
    3,818Total Current Assets
    
    
    290,651
    
    
    
    184,351Investments
    
    
    29,032
    
    
    
    26,175Property and Equipment:Owned property and equipment:Flight equipment
    
    
    857,598
    
    
    
    628,876Other
    
    
    43,713
    
    
    
    35,899901,311
    
    
    
    664,775Less: Accumulated depreciation
    
    
    (104,178
    )
    
    
    (79,985
    )797,133
    
    
    
    584,790Purchase deposits for flight equipment
    
    
    65,150
    
    
    
    52,753Total Property and Equipment
    
    
    862,283
    
    
    
    637,543Other Assets:Prepaid pension asset
    
    
    645
    
    
    
    1,261Goodwill
    
    
    21,779
    
    
    
    20,512Other intangible asset
    
    
    31,933
    
    
    
    31,298Other assets
    
    
    18,692
    
    
    
    15,772Total Other Assets
    
    
    73,049
    
    
    
    68,843Total Assets
    
    $
    1,255,015
    
    
    $
    916,912
  F-3




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(In US$ thousands, except share and per share data)
 As of December 31,2006
    
    
    2005LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    91,453
    
    
    $
    67,905Accounts payable
    
    
    47,627
    
    
    
    44,848Accounts payable to related parties
    
    
    8,819
    
    
    
    7,750Air traffic liability
    
    
    116,812
    
    
    
    85,673Taxes and interest payable
    
    
    31,490
    
    
    
    27,450Accrued expenses payable
    
    
    32,104
    
    
    
    14,780Other current liabilities
    
    
    11,268
    
    
    
    5,573Total Current Liabilities
    
    
    339,573
    
    
    
    253,979Non-Current Liabilities:Long-term debt
    
    
    529,802
    
    
    
    402,954Post employment benefits liability
    
    
    1,701
    
    
    
    1,602Other long-term liabilities
    
    
    7,713
    
    
    
    8,471Deferred tax liabilities
    
    
    4,557
    
    
    
    4,039Total Non-Current Liabilities
    
    
    543,773
    
    
    
    417,066Total Liabilities
    
    
    883,346
    
    
    
    671,045Shareholders Equity:Class A
common stock - 30,951,425 shares authorized and issued, 30,034,375
shares outstanding
    
    
    20,501
    
    
    
    20,501Class B common stock - 12,778,125 shares authorized,
issued, and outstanding
    
    
    8,722
    
    
    
    8,722Additional paid in capital
    
    
    3,340
    
    
    
    Retained earnings
    
    
    343,390
    
    
    
    217,862Accumulated other comprehensive loss
    
    
    (4,284
    )
    
    
    (1,218
    )Total Shareholders Equity
    
    
    371,669
    
    
    
    245,867Total Liabilities and Shareholders Equity
    
    $
    1,255,015
    
    
    $
    916,912
   F-4




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In US$ thousands, except share and per share data)
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Operating Revenue:Passenger revenue
    
    $
    798,901
    
    
    $
    563,520
    
    
    $
    364,611Cargo, mail and other
    
    
    52,259
    
    
    
    45,094
    
    
    
    35,226851,160
    
    
    
    608,614
    
    
    
    399,837Operating Expenses:Aircraft fuel
    
    
    217,730
    
    
    
    149,303
    
    
    
    62,549Salaries and benefits
    
    
    91,382
    
    
    
    69,730
    
    
    
    51,701Passenger servicing
    
    
    64,380
    
    
    
    50,622
    
    
    
    39,222Commissions
    
    
    57,808
    
    
    
    45,087
    
    
    
    29,073Maintenance, material and repairs
    
    
    50,057
    
    
    
    32,505
    
    
    
    19,742Reservations and sales
    
    
    38,212
    
    
    
    29,213
    
    
    
    22,118Aircraft rentals
    
    
    38,169
    
    
    
    27,631
    
    
    
    14,445Flight operations
    
    
    33,740
    
    
    
    24,943
    
    
    
    17,904Depreciation
    
    
    24,874
    
    
    
    19,857
    
    
    
    19,279Landing fees and other rentals
    
    
    23,929
    
    
    
    17,909
    
    
    
    12,155Other
    
    
    44,758
    
    
    
    32,622
    
    
    
    29,306685,039
    
    
    
    499,422
    
    
    
    317,494Operating Income
    
    
    166,121
    
    
    
    109,192
    
    
    
    82,343Non-operating Income (Expense):Interest
expense
    
    
    (29,150
    )
    
    
    (21,629
    )
    
    
    (16,488
    )Interest capitalized
    
    
    1,712
    
    
    
    1,089
    
    
    
    963Interest income
    
    
    7,257
    
    
    
    3,544
    
    
    
    1,423Other, net
    
    
    185
    
    
    
    395
    
    
    
    6,063(19,996
    )
    
    
    (16,601
    )
    
    
    (8,039
    )Income before Income Taxes
    
    
    146,125
    
    
    
    92,591
    
    
    
    74,304Provision for Income Taxes
    
    
    12,286
    
    
    
    9,592
    
    
    
    5,732Net Income
    
    $
    133,839
    
    
    $
    82,999
    
    
    $
    68,572Earnings per share:Basic
    
    $
    3.13
    
    
    $
    1.94
    
    
    $
    1.60Diluted
    
    $
    3.10
    
    
    $
    1.94
    
    
    $
    1.60
   F-5




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(In US$ thousands, except share and per share data)
 (US$Thousands)AccumulatedCommon Stock
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Other(Non-par value)
    
    
    Issued Capital
    
    
    Paid in
    
    
    Retained
    
    
    ComprehensiveClass A
    
    
    Class B
    
    
    Class A
    
    
    Class B
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    TotalAt December 31, 2003
    
    
    30,034,375
    
    
    
    12,778,125
    
    
    $
    20,501
    
    
    $
    8,722
    
    
    
    
    
    
    $
    86,360
    
    
    
    
    
    
    $
    115,583Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,572
    
    
    
    
    
    
    
    68,572Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,000
    )
    
    
    
    
    
    
    (10,000
    )At December 31, 2004
    
    
    30,034,375
    
    
    
    12,778,125
    
    
    
    20,501
    
    
    
    8,722
    
    
    
    
    
    
    
    144,932
    
    
    
    
    
    
    
    174,155Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,999
    
    
    
    
    
    
    
    82,999Other comprehensive
loss:Foreign currency
translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,218
    )
    
    
    (1,218
    )Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,781Dividends Declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,069
    )
    
    
    
    
    
    
    (10,069
    )At December 31, 2005
    
    
    30,034,375
    
    
    
    12,778,125
    
    
    
    20,501
    
    
    
    8,722
    
    
    
    
    
    
    
    217,862
    
    
    
    (1,218
    )
    
    
    245,867Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133,839
    
    
    
    
    
    
    
    133,839Other comprehensive
loss:Net Change in
fair value of
derivative
instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,998
    )
    
    
    (3,998
    )Foreign currency
translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,861
    
    
    
    1,861Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131,702Restricted Stock Plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,340
    
    
    
    
    
    
    
    
    
    
    
    3,340Actuarial loss
(Adoption of
FAS 158), net
of tax of $84
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (929
    )
    
    
    (929
    )Dividends Declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,311
    )
    
    
    
    
    
    
    (8,311
    )At December 31, 2006
    
    
    30,034,375
    
    
    
    12,778,125
    
    
    $
    20,501
    
    
    $
    8,722
    
    
    $
    3,340
    
    
    $
    343,390
    
    
    $
    (4,284
    )
    
    $
    371,669
   F-6




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In US$ thousands)
 (US$ Thousands)Year Ended December 31,2006
    
    
    2005
    
    
    2004Cash flows from operating activitiesNet income
    
    $
    133,839
    
    
    $
    82,999
    
    
    $
    68,572Adjustments for:Deferred income taxes
    
    
    (328
    )
    
    
    (885
    )
    
    
    (519
    )Depreciation
    
    
    24,874
    
    
    
    19,857
    
    
    
    19,279(Gain) / Loss on sale of property and equipment
    
    
    (612
    )
    
    
    (1,340
    )
    
    
    (1,125
    )Provision for doubtful accounts
    
    
    3,764
    
    
    
    813
    
    
    
    1,026Provision for obsolescence of expendable parts and supplies
    
    
    12
    
    
    
    3
    
    
    
    6Derivative instruments mark to market
    
    
    4,496
    
    
    
    (165
    )
    
    
    945Stock compensation
    
    
    3,340
    
    
    
    
    
    
    
    Changes in:Accounts receivable
    
    
    (15,317
    )
    
    
    (11,256
    )
    
    
    2,287Accounts receivable from related parties
    
    
    (1,661
    )
    
    
    (448
    )
    
    
    Other current assets
    
    
    (8,690
    )
    
    
    282
    
    
    
    (3,317
    )Restricted cash
    
    
    110
    
    
    
    (3,698
    )
    
    
    582Other assets
    
    
    (3,412
    )
    
    
    (7,601
    )
    
    
    (1,430
    )Accounts payable
    
    
    2,699
    
    
    
    (4,336
    )
    
    
    25Accounts payable to related parties
    
    
    975
    
    
    
    4,017
    
    
    
    1,089Air traffic liability
    
    
    30,658
    
    
    
    27,766
    
    
    
    6,200Other liabilities
    
    
    18,721
    
    
    
    9,360
    
    
    
    5,013Net cash provided by operating activities
    
    
    193,468
    
    
    
    115,368
    
    
    
    98,633Cash flows from investing activitiesAcquisition of investments
    
    
    (32,988
    )
    
    
    (48,298
    )
    
    
    (38,082
    )Proceed from redemption of investments
    
    
    22,906
    
    
    
    20,662
    
    
    
    30,639Advance payments on aircraft purchase contracts
    
    
    (58,697
    )
    
    
    (49,461
    )
    
    
    (16,314
    )Acquisition of property and equipment
    
    
    (193,330
    )
    
    
    (63,308
    )
    
    
    (65,764
    )Disposal of property and equipment
    
    
    3,129
    
    
    
    2,804
    
    
    
    3,201Purchase of AeroRepublica, net of acquired cash
    
    
    
    
    
    
    (22,285
    )
    
    
    Net cash flows used in investing activities
    
    
    (258,980
    )
    
    
    (159,886
    )
    
    
    (86,320
    )Cash flows from financing activitiesProceeds from loans and borrowings
    
    
    254,559
    
    
    
    68,423
    
    
    
    101,198Payments on loans and borrowings
    
    
    (77,247
    )
    
    
    (46,929
    )
    
    
    (32,125
    )Issuance of bonds
    
    
    
    
    
    
    27,504
    
    
    
    6,357Redemption of bonds
    
    
    (27,503
    )
    
    
    
    
    
    
    (35,675
    )Dividends declared and paid
    
    
    (8,311
    )
    
    
    (10,069
    )
    
    
    (10,000
    )Net cash flows provided by financing activities
    
    
    141,498
    
    
    
    38,929
    
    
    
    29,755Effect of exchange rate change on cash
    
    
    (212
    )
    
    
    29
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    75,774
    
    
    
    (5,560
    )
    
    
    42,068Cash and cash equivalents at January 1st
    
    
    94,106
    
    
    
    99,666
    
    
    
    57,598Cash and cash equivalents at December 31
    
    $
    169,880
    
    
    $
    94,106
    
    
    $
    99,666Supplemental disclosure of cash flow informationInterest paid, net of amount capitalized
    
    $
    26,779
    
    
    $
    21,126
    
    
    $
    16,021Income taxes paid
    
    
    11,284
    
    
    
    7,411
    
    
    
    4,286
   F-7




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Corporate Information
       F-8




---



##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   1. Summary of Significant Accounting Policies
 Basis of Presentation
  Principles of Consolidation
  Use of Estimates
  Cash and Cash Equivalents
  Investments
   F-9




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Expendable Parts and Supplies
  Property and Equipment
  YearsBuilding
    
    
    40Jet aircraft
    
    
    30Jet engines
    
    
    30Ground property and equipment
    
    
    10Furniture, fixture, equipment and others
    
    
    5 to 10Software rights and licenses
    
    
    3 to 8Aircraft rotables
    
    
    7 to 30Leasehold improvements
    Lesser of remaining lease term or useful life
 Measurement of Impairment of Long-Lived Assets
  Revenue Recognition
 Passenger Revenue
   F-10




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Cargo and Mail Services Revenue
  Other Revenue
  Frequent Flyer Program
  Passenger Traffic Commissions
  Foreign Currency Transactions and Translation
   F-11




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Maintenance and Repair Costs
    F-12




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Employee Profit Sharing
  Advertising Costs
  Income Taxes
  Goodwill and Intangibles
 Goodwill and Other
Intangible Assets
 Reclassifications
   F-13




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2. Recently Issued Accounting Pronouncement
 Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109
 Fair Value
Measurements
 The Fair Value
Option for Financial Assets and Financial Liabilities
 3. Acquisition of AeroRepública
     F-14




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4. Long-Term Debt
  2006
    
    
    2005Long-term fixed rate debt
    
    $
    347.6
    
    
    $
    292.5(Secured fixed rate indebtedness due through 2017.
Effective rates ranged from 3.98% to 6.75%)Long-term variable rate debt
    
    
    247.4
    
    
    
    150.9(Secured variable rate indebtedness due through 2017.
Effective rates ranged from 5.40% to 19.76%)Medium-term variable rate debt
    
    
    26.3
    
    
    
    (Unsecured variable rate indebtedness due in 2007
Weighted average rate of 5.86%, as of December
31, 2006)Private bond issuances
    
    
    
    
    
    
    27.5(Unsecured variable rate indebtedness due in 2006
Weighted average rate of 7.22%, as of December
31, 2005)Sub-total
    
    
    621.3
    
    
    
    470.9Less current maturities
    
    
    91.5
    
    
    
    67.9Long-term debt less current maturities
    
    $
    529.8
    
    
    $
    403.0
  Year ending December 31,2007
    
    $
    91.52008
    
    $
    43.72009
    
    $
    42.52010
    
    $
    42.42011
    
    $
    43.4Thereafter
    
    $
    357.8
   F-15




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         5. Investments
   F-16




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 6. Leases
 Accounting for Leases,
  Operating LeasesAircraft
    
    
    Non-AircraftYear ending December 31,
2007
    
    $
    35.4
    
    
    $
    5.42008
    
    
    36.8
    
    
    
    5.92009
    
    
    30.5
    
    
    
    5.32010
    
    
    20.3
    
    
    
    4.82011
    
    
    17.0
    
    
    
    4.3Later years
    
    
    32.6
    
    
    
    14.8Total minimum lease payments
    
    $
    172.6
    
    
    $
    40.5
  7. Financial Instruments and Risk Management
 Fuel Price Risk Management
   F-17




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      Foreign Currency Exchange Risk Management.
 Accounting for Derivative Instruments and
Hedging Activities
 Debt
   F-18




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Other Financial Instruments
  8. Cash and Stock Based Compensation Plans
  Adoption of SFAS 123R
 Share-Based Payment
  Non-vested Stock
      F-19




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    2006SharesOutstanding at beginning of the year
    
    
    Granted
    
    
    935,650Exercised
    
    
    Forfeited
    
    
    18,600Outstanding at end of the year
    
    
    917,050
   F-20




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9. Earnings Per Share
  December 31,2006
    
    
    2005
    
    
    2004Income available to common
stockholders for both,
basic and diluted EPS
    
    US$
    
    
    133.8
    
    
    
    83.0
    
    
    
    68.6Weighted average common shares outstanding
applicable to basic EPS
    
    
    
    
    
    
    42,812,500
    
    
    
    42,812,500
    
    
    
    42,812,500Basic earnings per share
    
    US$
    
    
    3.13
    
    
    
    1.94
    
    
    
    1.60Weighted average common shares outstanding
applicable to diluted EPS
    
    
    
    
    
    
    42,812,500
    
    
    
    42,812,500
    
    
    
    42,812,500Effect of dilutive shares:Non-vested Stock Plan
    
    
    
    
    
    
    422,053
    
    
    
    0
    
    
    
    0Adjusted weighted average
common shares outstanding
applicable to diluted EPS
    
    
    
    
    
    
    43,234,553
    
    
    
    42,812,500
    
    
    
    42,812,500Diluted earnings per share
    
    US$
    
    
    3.10
    
    
    
    1.94
    
    
    
    1.60
 10. Accumulated Other Comprehensive Loss
  Foreign
    
    
    
    
    
    
    DerivativesCurrency
    
    
    
    
    
    
    FinancialTranslation
    
    
    Pensions
    
    
    Instruments
    
    
    TotalBalance as of December 31, 2004
    
    US$
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign Currency Translation
    
    
    
    
    
    
    (1.2
    )
    
    
    
    
    
    
    
    
    
    
    (1.2
    )Balance as of December 31, 2005
    
    
    
    
    
    
    (1.2
    )
    
    
    
    
    
    
    
    
    
    
    (1.2
    )Foreign Currency Translation
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    
    
    
    
    1.8Unrealized gain (loss) on
derivatives instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.0
    )
    
    
    (4.0
    )Impact of adoption of SFAS
158, net of tax of $0.1
    
    
    
    
    
    
    
    
    
    
    (0.9
    )
    
    
    
    
    
    
    (0.9
    )Balance as of December 31, 2006
    
    US$
    
    
    0.6
    
    
    
    (0.9
    )
    
    
    (4.0
    )
    
    
    (4.3
    )
  F-21




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87,
88 and 106 and 132(R)
 11. Issued Capital and Corporate Reorganization
     F-22




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  12. Income Taxes
     F-23




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   2006
    
    
    2005
    
    
    2004PanamaCurrent
    
    $
    1.1
    
    
    $
    0.8
    
    
    $
    0.7Deferred
    
    
    
    
    
    
    
    
    
    
    ForeignCurrent
    
    
    11.5
    
    
    
    7.9
    
    
    
    5.5Deferred
    
    
    (0.3
    )
    
    
    0.9
    
    
    
    (0.5
    )Total
    
    
    12.3
    
    
    $
    9.6
    
    
    $
    5.7
       F-24




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Amount
    
    
    Percentage2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Provision for income taxes at
Panamanian
statutory rates
    
    $
    43.8
    
    
    $
    27.8
    
    
    $
    22.3
    
    
    
    30.0
    %
    
    
    30.0
    %
    
    
    30.0
    %Panamanian gross tax election
    
    
    (12.4
    )
    
    
    (8.9
    )
    
    
    (6.9
    )
    
    
    (8.5
    %)
    
    
    (9.6
    %)
    
    
    (9.3
    %)Difference in Panamanian
statutory rates and
non-Panamanian statutory rates
    
    
    (19.1
    )
    
    
    (9.3
    )
    
    
    (9.7
    )
    
    
    (13.1
    %)
    
    
    (10.0
    %)
    
    
    (13.0
    %)Provision for income taxes
    
    $
    12.3
    
    
    $
    9.6
    
    
    $
    5.7
    
    
    
    8.4
    %
    
    
    10.4
    %
    
    
    7.7
    %
   2006
    
    
    2005Deferred tax liabilities:Intangible Assets
    
    $
    (10.5
    )
    
    $
    (11.6
    )Maintenance reserves
    
    
    (1.7
    )
    
    $
    (1.5
    )Pension obligation
    
    
    
    
    
    
    (0.1
    )Others
    
    
    0.0
    
    
    
    (1.0
    )(12.2
    )
    
    
    (14.2
    )Deferred tax assets:Property and Equipment
    
    
    6.8
    
    
    
    7.0Post-employment benefit obligation
    
    
    0.1
    
    
    
    0.1Allowance for doubtful accounts
    
    
    1.5
    
    
    
    0.8Expendable parts and supplies
    
    
    0.6
    
    
    
    1.1Prepaid expenses
    
    
    0.4
    
    
    
    0.5Others
    
    
    2.1
    
    
    
    3.511.5
    
    
    
    13.0Net deferred tax liabilities
    
    
    (0.7
    )
    
    
    (1.2
    )Less: Current deferred tax assets
    
    
    3.9
    
    
    
    2.8Non current deferred tax liabilities
    
    $
    (4.6
    )
    
    $
    (4.0
    )
   F-25




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 13. Employee Benefit Plans
  Employers Accounting for
Pensions
 Employers Accounting for Post-employment Benefits
    Before
    
    
    Adjustment
    
    
    AfterAdopting
    
    
    to Adopt
    
    
    AdoptingSFAS 158
    
    
    SFAS 158
    
    
    SFAS 158Non-current benefit asset
    
    $
    1.6
    
    
    $
    (1.0
    )
    
    $
    0.6Deferred tax liability
    
    
    4.7
    
    
    
    (0.1
    )
    
    
    4.6Accumulated other comprehensive loss
    
    
    (3.4
    )
    
    
    (0.9
    )
    
    
    (4.3
    )
  F-26




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Panama Pension and Post Employment Plans
 Pension Plan
  2006
    
    
    2005Accumulated benefit obligation
    
    $
    2.8
    
    
    $
    2.6Projected benefit obligation at beginning of year
    
    $
    2.9
    
    
    $
    2.5Service cost
    
    
    0.3
    
    
    
    0.3Interest cost
    
    
    0.2
    
    
    
    0.1Actuarial losses
    
    
    0.4
    
    
    
    0.2Benefits paid
    
    
    (0.4
    )
    
    
    (0.2
    )Projected benefit obligation at end of year
    
    $
    3.4
    
    
    $
    2.9
  2006
    
    
    2005Fair value of plan assets at beginning of year
    
    $
    3.4
    
    
    $
    2.9Actual return on plan assets
    
    
    0.2
    
    
    
    0.0Employer contributions
    
    
    0.8
    
    
    
    0.7Benefits paid
    
    
    (0.4
    )
    
    
    (0.2
    )Fair value of plan assets at end of year
    
    $
    4.0
    
    
    $
    3.4
  2006
    
    
    2005Noncurrent benefit asset
    
    $
    0.6
    
    
    $
    1.3Net overfunded amount recognized in balance sheet
    
    
    0.6
    
    
    
    1.3Unrecognized net actuarial gain (loss)
    
    
    
    
    
    
    (0.8
    )Funded status of the plans  net overfunded
    
    $
    0.6
    
    
    $
    0.5
  F-27




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    2006
    
    
    2005Weighted average assumed discount rate
    
    
    5.54
    %
    
    
    5.50
    %Weighted average rate of compensation increase
    
    
    3.25
    %
    
    
    3.25
    %
  2006
    
    
    2005
    
    
    2004Service cost
    
    $
    0.3
    
    
    $
    0.3
    
    
    $
    0.3Interest cost
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.1Expected return on plan assets
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (0.1
    )Net periodic benefit expense
    
    $
    0.4
    
    
    $
    0.3
    
    
    $
    0.3
  2006
    
    
    2005
    
    
    2004Weighted average assumed discount rate
    
    
    5.50
    %
    
    
    5.75
    %
    
    
    6.25
    %Expected long-term rate of return on plan assets
    
    
    4.50
    %
    
    
    4.00
    %
    
    
    4.00
    %Weighted average rate of compensation increase
    
    
    3.25
    %
    
    
    3.50
    %
    
    
    4.00
    %
   F-28




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Future contribution payments:2007
    
    $
    0.8Future benefit payments:2007
    
    $
    0.62008
    
    $
    0.62009
    
    $
    0.62010
    
    $
    0.62011
    
    $
    0.6Remaining five years
    
    $
    2.5
 Post-employment Benefit Plan
  Colombia Pension Plan
 Pension Plan
   14. Fleet Impairment Charges
 Accounting for the Impairment or Disposal of Long-Lived Assets
   F-29




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15. Related Party Transactions
  Continental Airlines.
  Banco Continental de Panamá, S.A. (Banco Continental).
   ASSA Compañía de Seguros, S.A. (ASSA).
  F-30




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Petróleos Delta, S.A. (Delta Petroleum).
 Desarrollo Inmobiliario del Este, S.A. (Desarrollo Inmobiliario).
 Galindo, Arias & Lopez.
 Other Transactions.
     F-31




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 16. Commitments and Contingencies
   Covenants
   Labor Unions
     F-32




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Lines of Credit for Working Capital and Letters of Credit
    Termination of General Sales Agent
 Accounting for Costs Associated with Exit or Disposal Activities
   17. Subsequent Events
 Debt
    F-33




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Stock Grants
  Commitment
  Dividend distribution
  18. Segment Reporting
   F-34




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2006
    
    
    2005Operating Revenues:Copa Segment
    
    $
    676.2
    
    
    $
    505.7AeroRepública segment
    
    
    175.9
    
    
    
    103.0Eliminations
    
    
    (0.9
    )
    
    
    (0.1
    )Consolidated
    
    $
    851.2
    
    
    $
    608.6Depreciation:Copa Segment
    
    $
    23.7
    
    
    $
    19.3AeroRepública segment
    
    
    1.2
    
    
    
    0.6Consolidated
    
    $
    24.9
    
    
    $
    19.9Aircraft Rentals:Copa Segment
    
    $
    23.9
    
    
    $
    22.1AeroRepública segment
    
    
    14.6
    
    
    
    5.5Eliminations
    
    
    (0.3
    )
    
    
    0.0Consolidated
    
    $
    38.2
    
    
    $
    27.6Operating income:Copa Segment
    
    $
    166.6
    
    
    $
    103.0AeroRepública segment
    
    
    (0.5
    )
    
    
    6.1Consolidated
    
    $
    166.1
    
    
    $
    109.1Interest expense:Copa Segment
    
    $
    (25.2
    )
    
    $
    (18.3
    )AeroRepública segment
    
    
    (2.2
    )
    
    
    (2.2
    )Consolidated
    
    $
    (27.4
    )
    
    $
    (20.5
    )Interest income:Copa Segment
    
    $
    6.9
    
    
    $
    3.4AeroRepública segment
    
    
    0.4
    
    
    
    0.2Consolidated
    
    $
    7.3
    
    
    $
    3.6Income (loss) before income taxes:Copa Segment
    
    $
    155.5
    
    
    $
    89.8AeroRepública segment
    
    
    (9.4
    )
    
    
    2.8Consolidated
    
    $
    146.1
    
    
    $
    92.6Total Assets at End of Period:Copa Segment
    
    $
    1,168.1
    
    
    $
    851.1AeroRepública segment
    
    
    132.9
    
    
    
    98.1Eliminations
    
    
    (46.0
    )
    
    
    (32.3
    )Consolidated
    
    $
    1,255.0
    
    
    $
    916.9
  F-35




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##### Table of Contents



COPA HOLDINGS, S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2006
    
    
    2005
    
    
    2004North America
    
    $
    131.2
    
    
    $
    86.9
    
    
    $
    66.3Central America and Caribbean
    
    
    157.0
    
    
    
    125.3
    
    
    
    104.2South America
    
    
    450.3
    
    
    
    303.2
    
    
    
    148.8Panama
    
    
    112.7
    
    
    
    93.2
    
    
    
    80.5Total operating revenue
    
    $
    851.2
    
    
    $
    608.6
    
    
    $
    399.8
   F-36




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description10.44
    
    
    Supplemental Agreement No. 11 dated as of August 30, 2006 to the Boeing Purchase Agreement Number
2191 dated November 25, 1998 between the Boeing Company and Copa Holdings, S.A.10.45
    
    
    Supplemental Agreement No. 12 dated as of February 26, 2007 to the Boeing Purchase Agreement Number
2191 dated November 25, 1998 between the Boeing Company and Copa Holdings, S.A.10.46
    
    
    Supplemental Agreement No. 13 dated as of April 23, 2007 to the Boeing Purchase Agreement Number
2191 dated November 25, 1998 between the Boeing Company and Copa Holdings, S.A.12.1
    
    
    Certification of the Chief Executive Officer, pursuant to Rules 13a-14 and 15d-14 under the
Securities Exchange Act of 1934.12.2
    
    
    Certification of the Chief Financial Officer, pursuant to Rules 13a-14 and 15d-14 under the
Securities Exchange Act of 1934.13.1
    
    
    Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.13.2
    
    
    Certification of the Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 
    
    The Registrant was granted confidential treatment for portions of this exhibit.
  96