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In the annals of business turnarounds, Sarasota entrepreneurs Leo Riza and Mike Jones are leading an all-time doozy.
The first phase is done: Riza and Jones recently bought the operating certificate of a dormant Bolivian airline.
Now the hard part: They plan to lease a few Boeing 767s and build a full-fledged airline that will fly thousands of people roundtrip from Miami to several South American locales. The plan, furthermore, is to eventually launch a 15-person reservation, accounting and back office center for the airline in Sarasota.
Riza and Jones realize the resurrection of the airline, AerolÃneas Sudamericanas, sounds downright nutty on first glimpse. Bolivia, after all, is one of the poorest countries in South America, where dictatorships and political instability have marred the country for decades. And on the flip side, airlines are notoriously complex, capital-intensive businesses, where low margins have marred it for decades.
But Riza, the founder of R & R Associates, a Sarasota-based $2 million product design firm, says the extensive due diligence for the plan all turned up positive.
Riza and Jones, along with two other partners in the venture outside Sarasota, say they have put about $500,000 of their own money into the project.
“When we all sat down and talked about it, there was nothing that said it wouldn't succeed,” says Riza. “It has success written all over it.”
Adds Jones: “I've been in this business a long time, and I've never seen an opportunity like this.”
Riza says a major national bank agreed to finance some of the project, and the team has commitments from outside investors for $3.5 million in startup capital. Riza and Jones now seek at least an additional $5 million, money to train pilots and crews for the airline, which it will rename AerolÃneas Sudamericanas - USA, or AS USA.
“We are a niche airline,” says Jones, a veteran pilot who previously co-owned an airplane charter business in Sarasota. “We are not Delta.”
Riza says not being Delta gives the airline a market advantage, in that it doesn't have high legacy costs. Plus, says Riza, fuel is at least 50% cheaper in Bolivia than the United States. “That's what sets us apart from other airlines,” says Riza. “We can come in with a lower price point.”
The revamped AerolÃneas Sudamericanas - USA, according to an executive summary of the business plan, will initially use the population boom in Brazil to reach customers. The airline hopes to fly from Bolivia to Brazil to Miami on three Boeing 767-200ER planes, according to the summary. The planes, which Riza and Jones will lease, hold up to 224 passengers.
AerolÃneas Sudamericanas was founded in 2007, when the Bolivian government granted it permission to fly passengers, cargo and mail. But after a series of financial and personnel issues, the airline, which flew in and out of Bolivia's three largest cities, lost its operating certificate in spring 2010.
The Bolivian government sought American investors to buy the airline, says Jones, and that's how he got involved. Jones brought the deal to Riza.
“We are very excited to have an opportunity like this,” says Riza. “It's a beautiful opportunity.”
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