Arajet 3
Despite the regular and expected on-the-record congratulations, it’s not difficult to think that in the fast-growing Ultra Low-Cost Arajet, it is not the best time to rejoice. After failing to get DOT’s authorization to fly to the US in 2023, the company hoped to get the deal as soon as possible. But the Dominican Republic went the extra mile and put Arajet in a tricky situation.
Dominican Republic Tourism Minister David Collado and U.S. Undersecretary of State José W. Fernández finalized negotiations for the open skies treaty between the two countries. They announced that the official signing would occur in a ceremony headed by President Luis Abinader at the Dominican National Palace.
According to a press release, the agreement was closed at the State Department headquarters, marking the beginning of the complete implementation process after more than 25 years of negotiations.
Collado stressed that this will improve the country’s air connectivity, allowing Dominican airlines to fly to any destination in the United States and vice versa for U.S. airlines. He also emphasized that this would increase national competitiveness and could reduce the costs of flights between the two countries.
The U.S. government representatives praised the efforts of the current administration under President Abinader to close this agreement, noting that for them, establishing open skies agreements with their trading partners is a state policy seeking to improve competitiveness, encourage antitrust practices, and promote greater openness in the air sector for airlines.
The market between the Dominican Republic and the United States
The Dominican Republic is the second country in Latin America with the second largest number of international tourists; in 2023, it exceeded 10 million travelers, of which 7.3 million were by air. Last year, the United States accounted for 48% of air arrivals to the country, consolidating it as the primary source of tourists.
Currently, there are nine US airlines (American, Avelo, Frontier, Delta, JetBlue, Spirit, Southwest, Sun Country, and United) and two Dominican airlines (RED Air and Sky High Dominicana) connecting both countries, offering flights from La Romana (LRM), Puerto Plata (POP), Punta Cana (PUJ), Santiago de los Caballeros (STI) and Santo Domingo/Las Americas (SDQ) connecting 25 cities of the northern giant on a regular or seasonal basis in winter or summer.
The amended treaty will allow Arajet to enter this market, and the nine US carriers can increase their flights without restriction. How will Arajet compete with the US operators’ structure, scale, and expertise that can flood the market with cheap tickets to break the startup’s back?
This is a significant complication for Arajet’s expansion plans, which aim to carry local travelers to the US as the Dominican diaspora in the States is quite large. With a limited market, the idea of entering and offering an alternative with a rapidly growing business model that is increasingly accepted by those unfamiliar with a no-frills flight mindset was attractive.
The carrier’s Boeing 737-8 MAX fleet must compete with eleven operators for a growing market that can quickly become a battlefield. Just a few weeks ago, Arajet announced that it would operate from Punta Cana as its second hub: a victory for travelers who can now eliminate the stop in Santo Domingo but a capitulation from the original model that aimed to transform SDQ into a new “Hub of the Americas,” competing with Panama’s Tocumen, home of COPA Airlines.
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