Up in the air: a start-up Colombian airline aims high, even though its wings are clipped for now.(Aviation)

Investors are belting on a new international airline, even though it can't yet fly within its home country, Colombia. Founded recently by a banker and a pilot, the new airline--called Fenix--wants to rise from the ashes of the country's bankrupt airline Avianca.

Fenix, which expects to lease five planes to start service by the end of the year, hopes to take advantage of growing Colombian air traffic and a large community of Colombians living abroad. During the late 1990s, many Colombians fled the country, pressured by a four-decade civil war.

"According to the government, there are between 1.5 million and 2 million Colombians living in Europe who want to travel back and forth to Colombia:' says Guillermo Chavarriaga, a co-founder and former pilot for Colombian cargo airline Tampa and the Colombian carrier ACES.

Europe matters for Fenix because, for now, Fenix can fly in and out of Colombia from Bogota only, but not fly within Colombia and not to the United States. The Colombian Civil Aviation Authority denied its application for U.S. and domestic routes, saying there is no available space in the fixed routes the country can fly, by agreement between the Colombian and U.S. governments.

The airline can, however, fly now to Frankfurt, Paris, London, Rome, San Juan Puerto Rico, Caracas, Quito, Lima and Santiago.

"What we're doing is bringing the low-cost airline model to Colombia" says Luis Gomez, one of Fenix' co-founders and an investment banker at Recursos Corparativos in Bogota. "Whatever the lowest price we can offer for a ticket is, that's what we'll offer."

The market for air travel in Colombia is on the rise. It jumped in size between 1993 and 2003 due to increased international passenger traffic. In 1993, 1.8 million international passengers came through Colombia. By 2003, 2.9 million came through the country, 63% more than a decade earlier. Domestic traffic during the period rose 13% to 7.4 million in 2003 from 6.6 million in 1993. The domestic routes that the airline covets include larger cities such as Cali and Medellin. The popular tourist destinations the carrier seeks include the Caribbean island San Andres, the coastal city of Cartagena and Leticia, located on the southern tip of the country. All flights would come through Bogota first. Fenix says it will reapply for U.S. routes, most of which are in Florida, New York and New Jersey, places with considerable Colombian communities.

The founders hope to have the airline operating before the end of 2004, after receiving approval from U.S. and Colombian authorities. The company will hire 376 full-time employees and another 700 indirectly Fenix's founders are seeking US$9 million in traditional financing such as bank loans and are asking some employees to chip in another $3.5 million. Pilots are target investors, even those who don't work for Fenix. "The idea is that 500 pilots pay around $7,000 each, and they'll end up with 50% of the company," says Gomez.

When up and running, the company hopes to strike code-sharing deals with other low-cost airlines around Latin America, Europe and the United States, a move designed to bring more people from around the world to Colombia.

"The relationship between economic growth and growth of the airline market is around about even" says Gomez, pointing out that the government estimates Colombia's economy is set to grow 4% this year.

With its emphasis on foreign routes, Fenix hopes to convert Colombia into the hub of the Andean region and Central America. "We're looking to connect Colombia to the rest of the world, creating a hub in the center, in the strategic point of the Americas, bringing passengers from Lima, Quito, Santiago to Colombia to move them then on to Europe," says Gomez.

There are doubters. "Looking at the aviation industry in the future, I think the idea of a hub is history," says Eduardo Maya-Restrepo, an independent aviation analyst.

The Colombian airline market, too, is going through some rough times. Avianca's, the nation's largest carrier, is on the market after years of losses. Valores Bavaria, one of Colombia's largest holding companies, and the National Federation of Coffee Growers of Colombia, have agreed to sell Avianca to Brazil's Grupo Sinergy. Avianca has suffered from high fuel costs and labor.

Nevertheless, Fenix says the time is now to spread its wings.

"Our competition is very strong, but they're passing through a bad time at the moment. From our point of view as their competition, this is the perfect time to enter the market," says Gomez.

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