TUNIS The growth of a small Tunisian airline over the past two years is a rare success story in an economy ravaged by the country's 2011 revolution - and it points to the potential for more successes if political stability can be restored.
Corporate investment and tourist arrivals have shrunk while unemployment and inflation have risen since the overthrow of Tunisia's autocratic leader Zine al-Abidine Ben Ali in January 2011 launched a protracted period of political tensions.
Two murders of left-wing politicians triggered months of unrest this year; the ruling Islamist party and the opposition began talks last week on forming a non-partisan cabinet that will hopefully govern until elections next year.
It has been a poor environment in which to run a business, but Syphax Airlines SPHAX.TN has grown since Tunisian businessman Mohammed Frikha established it in 2011, just months after the revolution.
Syphax, which links Tunisian cities to destinations such as Paris, Istanbul, Jeddah and Tripoli in Libya, has expanded from operating two planes to four, and in July ordered six Airbus EAD.PA jets worth a total of $576 million, according to their list prices.
"It is important to launch investments in times of crisis," Frikha, 50, said in an interview at the Reuters Middle East Investment Summit.
"It's true there are difficulties, but success may be double because of the availability of government incentives and guarantees...This gives us an advantage over competitors which might invest after the crisis."
As a young man in the Tunisian commercial city of Sfax, Frikha initially planned to go into his father's textiles business. But he studied communications technology in France and founded his first company, telecommunications engineering venture Telnet TLNET.TN, in Tunisia in 1994.
Economists hoped the 2011 revolutions around the Arab world would unleash a wave of fresh investment, by loosening the grip of entrenched business elites who used their connections with autocratic governments to stifle competition.
For the most part, this has not happened so far; societies have been in too much turmoil. But it does appear to have happened in the case of Syphax.
Frikha noted that he had obtained a license to launch his airline just months after the overthrow of Ben Ali - a process which could have taken years under the old regime. Syphax, which describes itself as a "hybrid" airline with characteristics of both budget carriers and full-service airlines, competes with state-owned Tunisair, the much larger flag carrier.
Tunisair and Syphax have had a complex and sometimes rocky relationship, quarrelling publicly over the younger carrier's right to expand its route network and arrangements for Tunisair staff to provide services to Syphax.
The flag carrier is struggling to trim its bloated workforce, a task which has become more politically sensitive in Tunisia's post-revolution climate of union activism. As a young airline, Syphax does not face this challenge.
Political and economic turmoil over the past two years has affected Syphax, Frikha said - particularly waves of strikes in industries supplying the airline. But he said the instability had also helped Syphax, by allowing it to obtain financial incentives and assistance from the government more easily than it could have during normal economic times.
Frikha listed Telnet on the Tunis stock exchange in 2011, the first listing after the revolution. He listed Syphax in June this year, after offering 2.5 million shares worth a total of 25 million dinars ($15.3 million) - 45 percent of the firm's augmented capital - to the public and institutional investors.
Syphax's share price fell sharply in the initial months after listing, from 10.00 dinars to as low as 7.79, but it has since rebounded to 9.10 dinars. It has underperformed the overall Tunisian stock market .TUNINDEX, which dropped 1.8 percent during that period.
The airline posted an after-tax loss of 14.53 million dinars in 2012, according to its statements to the stock exchange. But its passenger traffic is growing rapidly, which suggests Syphax is heading towards profitability; it carried 113,291 people in the second quarter of this year compared to 15,599 in the year-ago period.
Frikha said he was aiming to carry 1 million passengers next year and 4 million annually after five years.
"I look forward to Syphax becoming a small Lufthansa or Emirates airline. I will increase the number of people coming to Tunisia and break into new markets such as the United States, Canada and China," he said.
Under pressure from its international lenders, the Tunisian government said this month that it was moving ahead with austerity measures including a 5 percent cut in public spending and a freeze on public sector wages in 2014.
Although it is not certain that the next cabinet, or the post-election government, can stick to this austerity, other plans for next year include the imposition of a 10 percent tax on exporting companies, which have been exempt from taxes. This marks a major shift from Ben Ali's heavily export-focused economic model.
Frikha said he supported the government's tax reforms because it was necessary to raise state revenues, but higher corporate taxes should be repealed once foreign investors started returning to Tunisia in large numbers.
He described the country's problems as mainly political, due to a struggle to create a stable democratic system rather than the result of any fundamental weaknesses in the economy of 11 million people, who are among the best-educated in the Arab world.
"We should be ready for Tunisia after the crisis, because we are able to become a model for success in the Arab Spring and resemble Turkey," Frikha added.
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(Editing by Andrew Torchia)