No rejoicing for Caribbean travellers
Sir Ronald Sanders
BRIDGETOWN, Barbados, Friday, March 23, 2012 - Air transportation in the Caribbean has always been difficult. The news that a privately-owned, low-cost carrier, REDjet, has been forced to suspend its operations has made Caribbean air transportation even more problematic.
Over the last 15 years or so, carriers from the United States, the United Kingdom, and Germany have only maintained a regular schedule of flights into certain countries in the region if the governments of those countries guarantee payment for a quantity of seats. When the airlines don’t sell those seats, the governments pay.
But, if air transportation into and out of the region from the US, the UK and Germany have been problematic, it has been a lot worse within the Caribbean where governments do not extend the same facility of paying regional airlines for an agreed number of unused seats.
"REDjet’s suspension of its operations is an occasion for regret not rejoicing". --Sir Ronald SandersPersons travelling by air within the Caribbean have a choice only between Caribbean Airlines Ltd (CAL), owned wholly by the Government of Trinidad and Tobago, or LIAT, a smaller airline mostly-owned by the Governments of Antigua and Barbuda, Barbados and St Vincent and the Grenadines. That limitation of choice has led to high fares.
Therefore, the introduction of a low-cost airline, REDjet, into the Caribbean last year was a welcome relief for Caribbean travelers who took to the airline like a duck to water, and cocked a snook at both LIAT and CAL, so delighted were they to travel at lower prices.
The travellers’ vote for REDJet by using its services rather than CAL’s or LIAT’s was directed particularly at CAL because they know that CAL flies on a huge fuel subsidy from the Trinidad and Tobago government, paying less than half the price for a gallon of fuel than is paid by LIAT, and indeed, was paid by REDjet.
In the view of most travellers – but especially those from Trinidad and Tobago – if taxpayers’ money is being used to subsidize the cost of CAL’s fights, the subsidy should be reflected in a lower cost of airfares. It was particularly galling for passengers to pay CAL’s high fares when its Chairman announced huge profits (on the basis of the fuel subsidy).
As it turns out CAL’s profits are a mirage. Once the fuel subsidy is subtracted from the declared profits, CAL is just another losing airline. The news that emerged that it has also not paid in recent months for the fuel it gets at a reduced price from the state-owned company, National Petroleum, shows that even with subsidized fuel, its operations are not efficient enough to pay its way.
In the case of LIAT, it has been the workhorse of the region for decades, and while its service has been less than exemplary, earning ridicule of its acronym as “Luggage in air Terminal” because passengers’ bags were often left behind, and “Leave Island Any Time” because of constant break-downs of its aging fleet of planes, Caribbean people retained loyalty to it. They appreciated that LIAT flew to destinations other airlines ignored because of the unprofitability of the routes, and that without LIAT movement around the region would be difficult if not impossible.
Despite that loyalty, Caribbean passengers were still upset at LIAT’s rising prices, particularly when the cost of travel between some Caribbean destinations became higher that the fares between the Caribbean and foreign destinations such as Miami, New York and Toronto. Adding to this displeasure is the awareness that, in the past, Caribbean governments have put up taxpayers’ money to keep the airline going and the three main shareholder governments are in debt to the Caribbean Development Bank for a loan they used to pump money into LIAT.
In fairness to LIAT, it has to be pointed out that no subsidy has been paid to the airline by any government in recent years. It also has to deal with almost a dozen trade unions with whom a genuine and empathetic working partnership has never been developed, and whose demands are a drain on the airline’s income.
But, LIAT incurred losses in 2010 and 2011, and unless there is a dramatic turn-around in its performance, it will need more money again. The first place it will turn is its shareholder governments which, at this time of severe austerity, have no money to put into it and cannot again borrow to do so.
So, no doubt, there is both a sigh of relief in the Boardrooms of CAL and LIAT that REDjet has suspended its operations, and a hope that the ‘suspension’ is permanent. For during its period of operation, it caused both LIAT and CAL to drop the cost of their airfares.
Undoubtedly, those fares will now rise again. And, they will rise to the level that CAL sets with its subsidized fuel. LIAT will be able to do no more than match CAL as best it can. But, since LIAT has no subsidized fuel, it will only be a question of time, until CAL’s fares and its incursion into LIAT’s only lucrative routes cripple LIAT.
So, Caribbean travellers in the Eastern and Southern Caribbean will again have to endure high costs of travel.
It has always been necessary for governments of the Caribbean Community and Common Market (CARICOM) to address seriously and comprehensively an Air Transportation policy, including an open-skies policy, that best serves the interest of all their member-states and their peoples. They have not done so, but the moment should no longer be deferred. The government of Trinidad and Tobago, in particular, should manifest its regional commitment, not by shelling-out money, but by abandoning the protection and promotion of CAL at the expense of the Caribbean people including their own citizens.
REDjet’s suspension of its operations is an occasion for regret not rejoicing.
The opinions expressed in this commentary are solely those of Sir Ronald Sanders. Sir Ronald Sanders is a Consultant and former Caribbean diplomat.