Routes Americas 2024 provided the framework for Arajet to expand on its vision of the current market conditions, its plans for the future, and the long-awaited Open Skies agreement between the Dominican Republic and the United States, which can convert the Low Cost into a major player within the continent.
IATA’s Peter Cerda sat down with Nacim Yala, Chief Commercial & Strategy Officer for the airline, to tell the story of an airline that aims to show an efficiency model with contact points with other carriers but wants to create an image of its own.
Peter Cerda: Thank you very much for being here. So, first of all, how long have you been at Arajet so far?
Nacim Yala: Right about two years.
PC: How do you view the airline’s growth?
NY: We have exceeded my expectations. When we launched, we had business plans, and surprisingly, we’ve outperformed them. In just four months, the team secured an AOC in record time and launched sales to 17 markets through 11 countries.
PC: After a year and a half of flying, how many cities do you operate in?
NY: In a year and a half, we operate in 15 cities across different regions, which is quite amazing.
PC: Are you aiming to be a baby version of Copa, or do you have a different strategy?
NY: Baby Copa? I take that as a compliment. We adhere to ULCC discipline and principles because cost is essential. However, we see ourselves as a value airline, focusing on the value that passengers receive in terms of the price they pay. While being compared to Copa is a compliment, we try to replicate what Copa does in our way.
PC: How important is the partnership with the government and regulators for your airline?
NY: Extremely important. We’ve had to work closely with the government and regulators since a carrier of our scale hasn’t been based in the Dominican Republic for a long time. We don’t get any special treatment but are thankful for the government’s support and flexibility.
PC: How critical is the airport partnership, especially considering your aggressive growth?
NY: It’s critical and like a marriage. We depend on our airport partners and believe we’re a big part of their growth, too. They’ve been accommodating, helping us manage our connecting network effectively.
PC: What’s the current balance within the airline in terms of traffic?
NY: I would say 80% point-to-point and 20% connecting traffic.
PC: Which market has been the most surprising in terms of quick success?
NY: Mexico has been surprisingly strong, especially our flights to and from the new Felipe Angeles International Airport. It performed well from the Dominican Republic side and as a popular destination connection.
PC: How do you manage competition in markets like Argentina and Brazil against larger airlines?
NY: It’s challenging, but we compensate by offering very competitive fares, advertising aggressively, and being very open-minded in how we partner with agencies. Being small and nimble is an advantage.
PC: How vital is entering the U.S. market for your airline?
NY: Entering the U.S. market is critical. Our initial plan was to start with the U.S., and not being able to operate there yet is painful. We see it as crucial for our future growth.
PC: How are negotiations on the Open Skies Agreement with the U.S. progressing?
NY: We’re not just building an airline; we’re building the country’s airline, and the government has been supportive. However, diplomacy works at a different pace than startups, so there’s a mismatch in speed.
Arajet made its first flight to Toronto and moves forward with its American expansion
PC: What challenges do you foresee for the airline?
NY: Besides fleet delays and geopolitical fluctuations, defining our identity and gaining trust, especially among distribution partners, are significant challenges. We also need to manage our rapid growth and ensure safety standards.
PC: With Bain Capital’s support, how did you secure new Boeing planes?
NY: The credit goes to the strength of our business idea and the resolve of our founder, Victor. Bain Capital provided the necessary backing, allowing us to operate with a cost-effective fleet.
PC: Given Boeing’s situation regarding production and quality, has the use of Boeing 737 MAX 8 aircraft been an issue for your airline?
NY: No significant impact has been noticed. We’re transparent about using Max 8s; overall, aviation is very safe. Only a small amount of passengers actually are aware of the model and go deep in that concern.
PC: What are your expansion plans for the next few years?
NY: We plan to densify our network by adding frequencies to existing routes and fortifying our hub structure. We’ll be slower in adding new destinations but still plan to grow sustainably.
PC: Are you considering expanding into the Eastern Caribbean market?
NY: The Eastern Caribbean is attractive, and we care about expanding there. However, our ability to expand depends on increasing our presence in the U.S. and connecting more traffic through our hub.
PC: Do you see Arajet expanding into other countries, in different AOCs, to capture domestic traffic?
NY: Never say never, but for now, we’re focused on managing our current scale. Expanding into other countries would require additional resources and is not a priority at the moment.
PC: How challenging has navigating regulatory requirements and rapid growth been?
NY: Obtaining our AOC was a focus for four months. While streamlining some processes would help, safety is paramount, and we wouldn’t advocate for cutting corners in regulatory compliance.
PC: How do you view the potential in Brazil and Colombia?
NY: Both markets are important and have significant growth potential. In Colombia, we operate in three cities: Bogota, Medellin, and Cartagena. The potential for growth in Brazil is even higher, given its size and our current operations. We anticipate expanding our service in these countries, adding more cities to our network as our capacity increases and as we continue to develop our hub, especially after establishing a stronger presence in the United States.
PC: What keeps you up at night regarding the airline?
NY: Managing all the complexities of running an airline and ensuring we maintain our growth trajectory without compromising safety, service quality, or strategic goals. Balancing rapid expansion with operational excellence and customer satisfaction is always a challenge.
Aviacionline: Are there plans to incorporate different aircraft types like the 737-7 for longer routes, such as the Argentina route, in which the -8 incurs a seat penalization?
NY: We’re not currently considering adding different aircraft types to our fleet. Despite taking a seat penalty on longer routes like to Argentina, we’ve adapted by introducing a premium offering within our existing aircraft configuration, which has proven quite popular. Our focus remains on operating a single aircraft type to maintain efficiency and simplicity in our operations.
Aviacionline: Do you plan to fly to Paraguay, Bolivia, and Uruguay?
NY: The short answer is yes. The longer answer is for us, the limitation is capacity. How many planes do we have to operate, and what can we connect those flights to? This brings back the importance of the United States and if we will fly there. My guess is yes, but it’s a matter of when.
PC: Given your rapid expansion, how do you ensure the airline remains competitive and adaptable to market changes?
NY: Our strategy includes being highly responsive to market demands, maintaining competitive fares, and leveraging our agility as a relatively new player in the industry. We also focus on building strong relationships with government and regulatory bodies, airport partners, and our customers to ensure we can quickly adapt to new opportunities or challenges. Additionally, investing in our fleet and technology to improve efficiency and passenger experience is critical to staying competitive.
