Ecuadorean start-up Air Cuenca leases ex-Air France 737-500

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Ecuador's domestic market could see the entrance of a fifth major carrier in the second quarter as Air Cuenca plans to launch services with a single Boeing 737-500.

Air Cuenca CFO Santiago Serrano says a group of 10 entrepreneurs from Cuenca, Ecuador's third largest city, have established the airline and leased one 737-500 from ILFC. He says the aircraft, which is now in France, will be ferried to Ecuador next month and will be used to launch services at the end of April or beginning of May.

An ILFC spokeswoman confirms the leasing company has arranged to lease a 737-500 previously operated by Air France to Air Cuenca. She says the aircraft, which bears manufacturer serial number 548, is owned by Triton Aviation and managed by ILFC.

Serrano says Air Cuenca will initially operate two daily flights from its Cuenca base to the capital Quito and one daily flight to Guayaquil. The carrier plans to add one or two more 737-500s by the end of 2010, which will be used to add frequencies on its first two routes and launch new domestic services including from Quito to Loja and Santa Rosa.

International flights will be considered as part of a later expansion phase. As Cuenca is currently not set up to handle international flights, Serrano says the carrier is looking at launching international flights to northern Peru from Santa Rosa, where a new international airport opened earlier this year. International flights from Guayaquil will also be considered.

Air Cuenca joins four existing jet operators - AeroGal, Icaro Air, LAN Ecuador and TAME - in Ecuador's highly competitive domestic market. According to Innovata, Air Cuenca will compete against AeroGal, LAN Ecuador and TAME on both the Cuenca-Quito and Cuenca-Guayaquil routes.

Competition against this trio will be tough as all three have strong financial backers. AeroGal was recently purchased by Latin American airline group Avianca-TACA while LAN Ecuador is a partly owned subsidiary of Chile-based airline group LAN. TAME is owned by the air force of Ecuador.

Serrano says Air Cuenca plans to differentiate itself by catering to the local Cuenca market. He points out that Air Cuenca will be the first airline in Ecuador based in Cuenca.

While Air Cuenca plans to operate non-Cuenca routes it will focus on smaller city pairs where there is limited competition. For example, Serrano points out that Quito-Loja is currently only served by TAME.

The company's initial investors are new to the airline industry, but have a successful track record in owning other types of businesses including hospitals. Some of the investors also have personal ties to aviation. Air Cuenca president Edgar Serrano is a private pilot although his professional background is as a doctor.

Santiago Serrano says his background is in finance but points out that he worked for the owner of now defunct flag carrier Ecuatoriana in 1998 to 2000. Santiago and Edgar Serrano are cousins.

Marcos Cisneros is serving as the carrier's commercial manager.

While Air Cuenca was granted last year an initial concession from Ecuador's authorities it has not yet completed the certification process with the country's DGAC.