Free stories left to read

Airline Weekly subscribers get unlimited access to daily news and weekly issues.

Dominican Republic’s Arajet Aims to Be Caribbean’s First Low-Cost Airline

Madhu Unnikrishnan

March 16th, 2022 at 1:17 PM EDT

Arajet 737

Startup Arajet has ambitious plans to knit the Caribbean together from its home base in the Dominican Republic, and eventually connect Central America and North America over Santo Domingo.

The hill ahead of it is steep. Airlines with similar ambitions have long struggled — like Antigua and Barbados-based Liat and Air Jamaica. Yet, the market is a prime opportunity for airlines: Few transportation options besides air travel exist between the islands. Tourism is a major economic driver for the region. And diaspora populations in North America and Europe are a perennial source of air traffic.

It is this latter market that Arajet founder and CEO Victor Pacheco. “We’ll predominately go into the diaspora market in North America,” he told Airline Weekly. “As we make sure they’re choosing Arajet, we’ll expand into the leisure and tourism markets.” More than two million people of Dominican descent live in the U.S. alone.

Pacheco founded the airline after a career in financial services. He is joined at the top by Mike Powell, the former chief financial officer of Wizz Air. Griffin Global Asset Management and Bain Capital are providing the financing for the new airline, but Pacheco did not elaborate on the amount of startup financing coming from the two firms.

But before it can execute on that strategy, Arajet needs regulatory clearance to fly. The carrier is in the process of getting its safety permits from the Dominican government, and once that’s secured, it can apply for a foreign air carrier permit from the U.S. Transportation Department. Pacheco believes Arajet will begin selling intra-Caribbean flights this spring, but he could not pinpoint a date for the carrier’s launch.

The intra-Caribbean market is the second prong of Arajet’s strategy. The market is poorly served — it can be easier to connect in Miami or even Europe when flying between islands in the Caribbean — but is plagued by high costs and fares. The carrier can’t lower the region’s high taxes and fees, Pacheco said, but it can lower fares. Airlines in the Caribbean typically have been full-service, catering more to tourists than residents. Arajet will offer a fully unbundled fare, reliant on ancillaries, in the vein of Volaris. Lower fares will stimulate demand, he said. “We are not looking to cannibalize existing carriers’ business,” he said. “We’re looking for new travelers.”

The third market Arajet is aiming for is connecting Central America, North America, and the Caribbean through its hub in Santo Domingo. This is a more crowded market, with carriers like Volaris in Mexico and Copa in Panama already offering low-fare connections between North and Central America. But Pacheco believes Santo Domingo offers a geographic advantage over hubs in Panama or Mexico. Flights via Santo Domingo could be as much as 20 percent shorter, which translates into less fuel burn and lower fares than competitors, he said.

Arajet placed an order for 20 Boeing 737-8-200, the 737 Max-family’s high-density aircraft also flown by Ryanair. These aircraft begin arriving in April 2024. Arajet also has options for 15 additional Maxes, but hasn’t determined which variant.

Until then, the carrier will turn to the spot leasing market for lift. It took delivery of its first 737-8 from Griffin last week. The second aircraft joins the fleet in April, on more in May, and two arrive in June. These first five aircraft will comprise Arajet’s fleet this year. It plans to turn to other lessors for six additional aircraft through next year. If it exercises all its options, Arajet will have a fleet of 46 aircraft later this decade, Pacheco said.

“It’s a pretty ambitious startup,” Pacheco admitted. “But we’ve seen the void in the market.”

Madhu Unnikrishnan

March 16th, 2022 at 1:17 PM EDT

Photo credit: Startup Arajet has ambitious plans to knit the Caribbean together through its hub in Santo Domingo, DR. Arajet

Special Offer: Choose From Quarterly or Annual Subscription Plans

2 of 3 free stories left to read