Oscar Hasan is building a new regional airline holding company to serve the Caribbean.

Under the holding company, Hasan is building two airlines - not one - to take maximum advantage of the complex maze of national and colonial governments in the region.

Hasan, the CEO, is not investing in route development but instead is relying on local tourism agencies. He projects that the company, Viva International [VIVI], will be profitable by early next year - the close of its current fiscal year. Viva eventually hopes to siphon away 5 percent of American Eagle's Caribbean business - $52 million in sales by year three - with its lower-cost, more direct regional flights.

To get there, Viva International is seeking $5 million in new capital.

While Viva International is structured as a public company with its stock thinly traded over the counter, the company entered the public arena in 2003 with a reverse merger with Auxer Group, which at the time was divesting itself of a variety of operating businesses. Instead of selling additional shares of Viva International to finance its growth - the route Republic Airways [RJET] has taken to finance its growth - Hasan said he hopes to raise the funds via a private placement of the company's stock.

As he builds the company, Hasan said he is taking a two-prong approach. "We not only cater to the tourist market that is developing, but we also cater to the general public in these countries."

Viva's two-prong approach extends beyond its marketing efforts.

Viva International has two airlines, and Hasan has not ruled out forming additional airlines in other Caribbean nations to take advantage of routes or landing rights that may be limited to flagship carriers.

The original business plan called for the formation of Viva Dominicana, which will operate scheduled service out of Santo Domingo, Dominican Republic. Since local investors own 51 percent of the airline, it is considered a flagship carrier. However, the airline is still working with local regulators to complete the final certification. It will be considered a Part 129 foreign carrier under U.S. Federal Aviation Administration (FAA) rules.

Tried of waiting, Viva International this spring paid $350,000 for Cool Tours, a Part 135 on-demand charter operator in Puerto Rico. Renamed Eastern Caribbean Air, Viva began flying Cool Tours' nine-passenger King Air 100 in June on routes between Puerto Rican airports and to Santo Domingo. The plane has been 85 to 90 percent filled on each flight, Hasan said.

"Our long-term goal is to create a hub-and-spoke system with one hub in the Dominican Republic and one in Puerto Rico with an air bridge between the two," Hasan said. "It will give us absolute coverage throughout the Caribbean."

Eastern Caribbean Air has the rights to fly to U.S. territories as well as the holdings of the United Kingdom, including the British Virgin Islands.

On the other hand, Viva Dominicana has the flexibility to fly directly to other Caribbean islands without first touching U.S. soil in Puerto Rico. It also has the rights to fly to nations, such as Cuba, that are off limits to U.S. carriers.

The business plan continues to call for Eastern Caribbean Air to continue to operate as an on-demand charter carrier while Viva Dominicana will provide scheduled service.

Viva International has developed a second maintenance and operational base in the Dominican Republic, which costs only one-third the amount the company needs to run its similar base in Puerto Rico, said Pier Bjorklund, a Miami-based business development consultant working with Viva International.

Viva Dominicana's flexibility will enable it to eat into American Eagle's business, Bjorklund predicted. For example, American Eagle cannot fly directly from Santo Domingo to Aruba; it must originate in Puerto Rico. With each stop on U.S. soil, he said the passengers must clear U.S. customs and immigration. "From the Dominican Republic, we are allowed to fly to many more places. We can undercut American Eagle all day long," he said.

With the exception of Copa Airlines flights from the Dominican Republic to Panama, there are no flights from the island to those island or nations south of the Dominican Republic, Hasan noted, pointing to future growth opportunities.

"American Eagle is incredibly strong in the region. However, they don't cater to the islands and their needs. They cater to their domestic schedule," Hasan said. "Their service is extremely expensive for the amount of actual flying time. They have had the advantage of having the market to themselves for year and years. We are not a discount carrier per se, but because we are watching our costs, it allows us to come in and be cost-competitive with them."

Neither Eastern Caribbean Air nor Viva Dominicana have code-share partners. "We are looking to build relationships with the major European carriers to be a feeder from throughout the Caribbean marketplace," Hasan said. "No other airline has worked with international carriers to provide ongoing feeder service.

"The Caribbean is drawing more tourists because it is a secure place. After Sept. 11 and the tsunami, the general population is concerned about traveling to the Far East and Europe. Being close to home, the Caribbean is secure. This has created growth opportunities that now require an airline to expand. Our opportunity is to assist the other islands to establish an airline. There are island nations that are desperate for transportation from their island to other islands. We are working with the business communities and the governments to see what the needs are."

When Viva Dominicana takes to the skies, it will have fleet for four leased Saab 340s and one Jetstream 32. A Jetstream 31 will soon be added to Eastern Caribbean Air fleet.

The carrier has four pilots who have been flying the King Air and will fly the Saabs, but the carrier will wet lease the Jetstreams from Corporate Flight Management. The Smyrna, Tenn., company will provide the pilots for the initial portion of the 36-month lease.

Eastern Caribbean Air has been averaging nine flights per week. It has four weekly flights scheduled between Isla Grande Airport in downtown San Juan and Herrera Airport in downtown Santo Domingo. These flights serve as executive shuttles between the two cities for those businessmen who do not want to be bogged down in customs at each city's major airport, Hasan said.

The Saabs will be used to fly longer routes from three major Dominican Republic cities to Guadeloupe, Martinique, and Caracas, Bjorklund said. As the traffic builds up, Viva plans to lease BAe 146s to serve the more distant destinations, such as Caracas.

"We will add the 146s in the last quarter," Hasan said. "As we add the Saabs, the response on certain routes heading southbound will require bigger aircraft." The BAe 146s that Hasan intends to lease will carry 80 passengers and also will be wet leased.

The carriers' proposed routes are being developed by travel agencies instead of the airlines investing capital to research and market the routes, Bjorklund said. Government tourism departments and travel agencies propose routes and then underwrite them. "We are paid cash in advance. They market it for you," he noted.

Eventually, traffic will be built up on these routes so that the airline will be able to fly them without the underwriting of the tourism industry.

Within the next two months, the carriers will be participating in three tourism trade shows in the region to build the contacts for further route development. "They want the growth. As we are coming out of the gate, they are immediately there asking for us to fly to their destinations," Hasan said. The countries are developing the routes for Viva, he added.

One pending contract would have Viva Dominicana flying Boeing [BA] 747s to Brazil. Hasan said the government has requested the carrier to cover flights to Brazil. The size of the government's guarantee will be critical to completing this deal. "It has to make economic sense to us. To get into the big jets we have to have the support of the government," he said.

>>Contacts: Oscar Hasan, (231) 932-7490; Pier Bjorklund, (800) 454-7912.<<