European official questions airline merger move

BRIDGETOWN, Barbados, November 1, 2007 – With only two weeks remaining before Caribbean Star Airline ceases operations and LIAT regains its place as the flagship airline of the Eastern Caribbean, one European official is questioning the airline merger move.

Head of the European Commission’s delegation in Barbados and the Eastern Caribbean, Ambassador Amos Tincani has suggested to Caribbean officials that a restructuring of the sub-regional market could have been a viable alternative to the merger.

Tincani threw out this alternative in a recent address before the Special Ministerial Meeting on Regional Air Transport Solutions held in San Juan, Puerto Rico.

“It is often said in the Caribbean that: ‘The market is too small to support several airlines’ and that competition should be restricted rather than encouraged. This rationale is invoked to justify the acquisition by one Eastern Caribbean Airline of its only competitor in the sub-regional market.

“It may well be true that the East Caribbean airline market (about 800,000 people and some 10 island destinations) is too small for two competing carriers, but an alternative would be to redefine the market in a wider context,” Tincani told delegates at the October 19 meeting.

“As an alternative to the creation of a quasi-monopoly currently taking place, the Caribbean could encourage the progressive liberalisation of air services, which would in turn bring about healthy competition, better services and cheaper fares,” he said.

Caribbean Star will cease flying on November 15. From that date, Caribbean Star will shut down its operation and LIAT will go forward, operating the combined fleet of Dash-8 aircraft.

This follows on from formal merger discussions which began last October and culminated with a purchase agreement, which was finalised on October 24, 2007, for the transfer of Caribbean Star’s assets to LIAT. While aircraft were not covered under last month’s transaction, it is expected that the five remaining aircraft operated by Caribbean Star will be transferred once Caribbean Star ceases to operate in two weeks.

Tincani pointed to a number of regional air transport agreements, such as the CARICOM Multi-lateral Air Services Agreement and the Association of Caribbean States air agreement, that have yet to be operationalised, but which he suggested could widen the market place through the creation of a “CSME single sky”.

The ambassador also suggested regional officials look into negotiating a bilateral open sky agreement with the European Union (EU), especially in the context of the economic partnership agreement currently being negotiated between the Caribbean Forum countries and the EU.

However, Tincani said such liberalisation had to be carefully monitored: “The flip side of regional deregulation is to ensure that there is a strong competition policy and authority at regional level to ‘police’ the system and avoid industry concentration and monopolistic tendencies.

“The CARICOM Competition Commission, that the EU is assisting to establish, should be competent for competition in the airline sector, including on state subsidies,” he said.