Class Project Takes Wing with Proposal for a Colombian Airline

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Class Project Takes Wing with Proposal for a Colombian Airline

Four Sloan classmates are embarking on a nontraditional career path: launching a no-frills airline in Colombia
June 1, 2008

Some of this spring's Business School graduates are embarking on a nontraditional job search. A four-member team with a dream class project drew up plans to launch a no-frills airline in Colombia. And just to make it really interesting, they intend to promote the new airline through a reality television show developed by "Ugly Betty" creator Fernando Gaitan.

The Stanford Graduate School of Business team of Mexican, Japanese, Brazilian, and Filipino nationals already has an idea, a business plan, and a commitment from an experienced former airline CEO. Now all they need is cash — they're estimating more than $20 million — along with numerous government approvals and enough moxie to wrest customers from existing air carriers, notably established market leader Avianca and year-old discount regional airline Easyfly.

The proposed South American airline is the brainchild of Mexican national William Shaw. Before entering the Business School's Sloan Master's Program last year, he was commercial manager at British Airways World Cargo office in San Francisco, the latest in a string of airline jobs he's held ranging from servicing planes to checking in passengers.

The idea began last fall with a conversation between Shaw and Sloan classmate Shingo Kobayashi. Back in his native Japan, Kobayashi had worked in aircraft leasing and sold planes to the Japanese Defense Force.

What drew Shaw and Kobayashi together as project partners? "We had engaged in a lot of conversations about the airline industry, its downturn, oil prices, all the stuff the airlines are going through," Shaw said. "I was explaining to Shingo that Latin America is the land of opportunity for airlines. Usually you have one existing airline that's been around forever. They charge a very high fare. So, if you live in places like Colombia and Venezuela, your choices for air travel are very limited to airlines that don't provide a great service."

The pair pulled together a team, and applied for the strategic management course Strategic Management: Evaluating Entrepreneurial Opportunities. Codeveloped and taught by Dennis Rohan, a lecturer in management, that class, with sections taught by four different faculty, is so in demand that students must apply to enroll, and those with the best ideas make it in.

To attract the rest of the team, Shaw put out an email last fall to other business students laying out problems faced by airline passengers in Latin America and inviting them to help create an alternative.

Among the dozen respondents was Rhyan Uy, MBA '08. After working in his native Philippines as a university math instructor, Uy joined his family's chain of optical stores. As a business student, Uy said he wanted to break into the airline industry, "something I really find sexy." While he lacked airline industry experience, Shaw said he chose Uy for his abundant energy.

The group also chose Gabriel Migowski, a member of the MBA class sof 2009 originally from Brazil. A former consultant with Bain & Co, he'd authored a major analysis of the Latin America airline market, bringing much aviation industry knowledge to the table.

"We want to grab people with similar but also different backgrounds to get a very engaging and diverse team that will allow us to bring out the best ideas possible," Uy explained. Then it was on to complete industry research. Rohan connected the team with a mentor, Scott Bekemeyer, MBA '93. In the mid-1990s, Bekemeyer had helped launch Sierra Express Airlines, a regional carrier based in Oakland. He supplied the team with ideas, and walked them through what it would take to start an airline business.

The team decided to focus on Colombia, intrigued by market research showing the country drew more than one million foreign airline passengers last year and has fairly stable economic and political landscapes. They decided to create a no-frills airline with ticket prices about 20 percent lower than current companies serving the region. To keep costs low, the proposed carrier's fleet would include newer, more fuel-efficient planes, wouldn't offer free meals, would use online booking, and would stick to high-demand travel routes.

Juan Emilio Posada, a former Avianca president and chief executive, has signed on to become chairman of the proposed airline. Shaw would be the company's chief executive, while Kobayashi would be chief financial officer. Uy would handle product development, while Migowski would be vice president of fleet and network operations.

Some team members have already been to Colombia to file the paperwork to charter the company and meet face to face with Posada.

Then, there's the "Ugly Betty" connection.

Gaitan, who created the celebrated Colombian telenovella that's now a prime time television phenomenon in the United States, has agreed to write a reality show for Columbian TV about the students' airline startup. He would be creative director for the series, under a deal Shaw said was reached last month with Colombia-based television production firm Vista Productions. Similar to the popular American show "The Apprentice," airline employees, including flight attendants and some entry-level staff, would be selected on the show. Viewers might even vote to choose the airline's name. "Then you create this massive database of people who are already involved in your airline and want to fly," Shaw said.

The day after the final episode of the reality series, plans are for the new Colombian carrier to hold its inaugural flight.

Before all that becomes a reality, of course, there's the matter of raising those millions in startup cash.

"We're at the point where we're starting to look at the capital markets and using the Stanford network to go reach out to possible investors," Shaw said.

By Michele Chandler

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