Arajet, the leading Dominican Republic-based airline, is poised to challenge US carriers for the coveted US travel market. Once the Constitutional Court and the Senate clear the Open Skies Agreement between the Dominican Republic and the United States, Arajet will be free to compete directly with major US airlines.
The Open Skies Agreement marks a significant milestone for Dominican aviation, eliminating route monopolies and allowing airlines to operate freely between the two countries. This development is expected to increase competition, leading to lower fares and more travel options for consumers.
“We can compete,” says Arajet CEO, Victor Pacheco. “We are anxious that this is ratified so we can offer an introductory US$450 rate to New York,” he says. The hope is that Congress will say “yes” on the agreement in time for Christmas. Pacheco is bullish on the company’s future. “We have 507 employees, and expect to create 7,000 jobs by 2030.”
Arajet’s main competitor is JetBlue, at present the leading airline serving the US markets from several Dominican airports. But the airline’s flawed reliability track record contrasts notably with the reputation Arajet has been building with its flights to Canada, Mexico, Central and South America and the Caribbean. JetBlue had sought to merge with Spirit. After that deal did not go through, the airline announced it would improve its reliability.
Arajet compete with Spirit in the ultra low cost airline serving the Dominican airports. American, Delta and United are regarded as legacy carriers. JetBlue, Southwest, Frontier are US low cost carriers with flights to Dominican airports.
Arajet had requested in March 2023 permission to fly to San Juan, Puerto Rico, Miami and New York in the US. But the airline met with formidable competition from US airlines that argued the airline was not a Dominican airline. Government lobby fostered the signing of the Open Skies agreement in July 2024.
In an interview for El Sol de la Mañana radio morning talk show, Pacheco acknowledges that the airline majority is foreign-owned, but he says the airline is based here and paid RD$3 billion in taxes in 2023 and expects to pay RD$6 billion in 2024. US airlines pay only 2.7% of their income as they operate under a special tax regime.
Furthermore, Pacheco explained during the interview that Civil Aviation Law 66-13 was modified in 2013 to then accommodate the Brazilian airline Gol. The amendment establishes that up to 100% of shares of an airline can be considered Dominican if that airline is part of a group that has recognized airlines or is an international airline that wants to establish its base in the Dominican Republic. Arajet received the waiver from the Executive Branch for its certification to fly. The investment fund behind Arajet is the owner of Virgin Australia, one of four domestic airlines in Australia — Qantas, Virgin Australia, Jetstar and Rex.
Arajet is based at Las Americas International Airport (SDQ) and recently announced it will also be using Punta Cana International Airport (PUJ) as an international hub starting November 2024, taking advantage of the formidable collection of airlines from all around the world that serve PUJ. Arajet has filed for around 20 routes using PUJ.
Victor Pacheco says that the United States gained little from the Open Skies agreement because the Dominican government to foster tourism over the years had no problem authorizing new routes for foreign airlines. “The reality is that we gave them the country a long time ago. That has led to the tourism we have today,” emphasizes Pacheco.
Over the years, Dominican airlines have had to abide by the 1949 US-DR aviation agreement and were impeded from flying beyond San Juan, Puerto Rico, Miami and New York. Recently exemptions were added to allow Dominican flights to Providence, Rhode Island and Tampa, Florida.
Pacheco explained that the US airlines for years delayed the open skies agreement. Pacheco highlights that the Open Skies agreement now gives the DR access to exploit the US markets.
Now, Arajet is ready to compete. “We are excited about the possibilities that the Open Skies Agreement brings,” Pacheco has stated calling the agreement a game-changer for the Dominican Republic.
Arajet’s business model focuses on offering low-cost fares and convenient flight options. The airline targets both leisure and business travelers, emphasizing its competitive pricing and modern fleet. Pacheco says they are implementing the ultra low-cost model used in the United States and Europe. That is they have only one class of seating, no free checked baggage, fees for additional services, food and beverage is for sale on board, and have no airline alliances. Moreover, the airline uses only one kind of aircraft with savings on pilot training and spare parts for economies of scale.
Another key development is the possibility of the approval by the Constitutional Court of the Dominican Republic’s pursuit of pre-clearance facilities at local designated airports. This would allow US Customs and Border Protection to process passengers before they depart for the United States, streamlining the arrival process and potentially attracting more travelers.
For the time being, Pacheco explained that the Open Skies agreement not only eliminates monopolies of airline routes, but also removes monopolies for local companies catering to the airlines. Companies offering luggage handling, ground, food and ramp services will have to compete with local companies for the business of the airlines.
Pacheco emphasizes that the Open Skies Agreement is the same standard agreement the US has signed with other countries in the Americas. He says initially there were concerns because what could have been added or removed was not known.
One local concern was that the agreement would include a 7th liberty for flying to the US, whereby a US airline could set up base in the DR without having to fly to US, yet be allowed from here to fly to a third country. This provision was not included. “There is not a boogeyman in the agreement,” says Pacheco.
It all comes down to competition. Since it began operations on 15 September 2022 with its inaugural flight to Barranquilla, Colombia, Arajet has been growing in leaps and bounds, attracting thousands of travelers and adding new airplanes. The airline has 10 airplanes and expects to add another 10 by 2025.
The airline flies to more than 20 destinations in the Americas. It is also strongly contributing to the Dominican Republic’s reputation as an aviation hub. Pacheco explains: “Any day, 800 to 950 people use our flights to connect,” he says. “Arajet is known in Latin America as a reliable carrier to get to your destination in the Americas.
Read more:
El Sol de la Mañana
Virgin Australia
Australian Aviation
Australian Aviation
DR1 News
13 August 2024