February 3, 2017 / 5:58 PM / 7 months ago

Top airline investor launches budget carrier in Chile, eyes Latin America

SANTIAGO, Feb 3 (Reuters) - Bill Franke, one of the world's most-influential investors in budget airlines, debuted a low cost carrier in Chile on Friday that aims to expand regionally in the coming years.

Franke, co-founder and managing partner of airline-focused investment fund Indigo Partners, said new carrier JetSmart plans to operate three Airbus A320s this year in Chile and add another six in 2018. Once established in Chile, JetSmart will eye regional expansion, he said.

"We haven't gotten to that yet, but we have a lot of interest expressed by other countries," Franke told Reuters after the debut in Santiago.

"We need to get the base of operations here, stabilize the airline...and then we will expand the airline."

Franke's Indigo Partners, which already controls Denver-based Frontier Airlines and owns part of Mexico's Volaris, is known for unbundled or a la carte fares in so-called ultra-low-cost airlines, where passengers are offered cheap base prices with the option of paying more for extras.

Indigo Partners is also in talks to acquire part of Canada's Enerjet, and Franke told Reuters the fund was currently talking with regulators to better understand foreign ownership rules.

Canada's transport minister announced in November that the nation would lift foreign ownership caps in airlines to 49 percent from 25 percent in a bid to aid start-ups seeking investors.

"There's no final decision," Franke said.

"We've hired advisers, and we're in the process of talking to the government about ways we might be able to invest in a Canadian airline, but it's really an issue between the regulators."

Regarding Europe, Franke said the airline scene is ripe there for consolidation, echoing various other industry leaders who have made similar comments in recent months.

"I think over time that will happen in Europe, and we will be a motivator to consolidation," he said.

Franke said Chile's large middle class, relaxed foreign ownership rules, and clear regulations made the country attractive for Indigo Partners' entrance into Latin America.

In neighboring Argentina, which Franke called a "nice market," the budget airline industry is also heating up, as low-cost Norwegian Air Shuttle ASA and start-up Flybondi have announced plans to enter the market. That nation's transport minister told industry executives in December that the government expects $1.7 billion in budget airline investment over the next four years.

"We know Argentina well....It's a nice market, we like the market, but it's more complicated than Chile," Franke said.

"So we want to have a nice, stable platform, which we think Chile provides." (Writing by Gram Slattery; Editing by Anthony Esposito and Cynthia Osterman)

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