REDjet goes bust
Fri, June 08, 2012 - 5:01 PM
BRIDGETOWN, June 8, CMC – A day after dismissing its 94 workers, the Barbadian flag carrier REDjet announced on Friday it was insolvent and had “no future in Barbados”, claiming its host government had failed deliver on promised support, the company said in a statement here.
“Airone Ventures Limited doing business as ‘REDjet’ hereby announces the suspension of all operations in Barbados. REDjet profoundly regrets this decision and its impact on its suppliers, staff and passengers,” the year-old carrier said.
The airline had reportedly been lobbying the Barbadian and Guyanese governments for financial backing to return to the skies.
The company said it has filed a "Notice of Intention to Make a Proposal" to its creditors with the Supervisor of Insolvency under the Bankruptcy and Insolvency Act that puts itself in the hands of a trustee, blocking any legal proceedings to reclaim debts for at least 30 days.
“Immediately upon filing all proceedings against the company are stayed. No creditor may therefore exercise any remedy against the company, while the stay is in place, in respect of any debt owing as of 5th June 2012,” the company said.
The airline said it believed it had secured Barbados’s “full aero-political support” and that “this “turn of events could have been avoided” if it had gained access to all markets as the island’s designated national carrier.
“However regrettably this has not been the experience of the airline over the past two years.
“With no consensus at a political or technical level to deliver on these commitments which are critical to the development of any airline there can be no future for REDjet in Barbados,” the company.
“Therefore, despite the best efforts of the airline and its committed staff, the airline has been forced to make the regrettable decision to suspend all its operations.”
The airline had promised to reimburse ticket holders within three weeks of applying for a refund in writing but three months later, several would-be travellers said they had not been repaid.
But the airline said on Friday that “the trustee will at the appropriate time invite creditors of amounts of 250 dollars and more, including passengers who have purchased tickets with the airline but who have yet to apply for a refund, to prove their debts as required by the Act and also call a meeting of creditors for the purpose of considering and approving the company’s proposal.”
The stay of proceedings does not apply to debts owed for services rendered the company after Friday’s filing date, the company said, adding that these debts “will be dealt with in the ordinary way.
“The stay will be in place for 30 days initially but the Court will entertain reasonable applications for extension of the stay to permit a proposal to creditors to be completed.”
Billed as a low-cost, no-frills carrier initially offering fares as low as 9.99 US dollars, REDjet quickly became the toast of Caribbean travellers with flights to Guyana, Trinidad and Tobago and Jamaica and a raft of agreements to fly to other regional destinations.
But the airline abruptly suspended its flights on March 16. It then lost its air operator’s certificate with Trinidadian civil aviation authorities and its Barbados licence.
The company appears to have failed in its bid to get regional governments to put money into the cash-strapped airline.
On Wednesday, Antigua and Barbuda’s Prime Minister Baldwin Spencer, whose government co-owns rival carrier LIAT with Barbados and St Vincent and the Grenadines, said St John’s had refused to come to REDjet’s aid, saying its discount business model was “unsustainable” and “doomed to failure”.
“The whole question of lending a hand, I don’t think that question arises at all because we always felt that the [low-fare] concept that they put forward was clearly untenable,” Spencer told Antigua’s Observer Radio on Wednesday.
On May 8, Geoffrey O’Byrne White, a former chief executive of the Irish regional airline CityJet, replaced founding CEO Ian Burns in managing the airline’s day-to-day operations.
In announcing its suspension of flights in March, the privately owned airline suggested that it was expecting “state assistance” to continue operations and blamed "subsidised" competitors for its troubles.
“REDjet is hopeful that we will be given a small part of the State assistance others receive, as it will allow us to get our recently approved and exciting new routes established and profitable. Once this happens, our shareholders and staff will do their utmost to see that there is no return to high fares and business as usual,” the company said then.
Incorporated in Barbados as Airone Holdings Ltd by father-and-son Irish entrepreneurs Robbie and Ian Burns, REDjet took to the air with MD-80 series jet aircraft on a regularly scheduled service between Barbados and Guyana in May 2011.
But by November, its largest Barbadian shareholder, Barbadian industrialist Ralph “Bizzy” Williams, said the airline needed an injection of four million US dollars to stay in the air.
Williams and Burns blamed the governments of Barbados, Trinidad and Tobago and Jamaica for delaying approvals and licences in flying to each other’s destinations, claiming a breach of a regional ‘open-skies’ policy. The two said the delays cost the airline millions of dollars of start-up capital.
On May 8, as White replaced Burns at the helm of the airline, the Daily Nation newspaper reported that Williams had “quietly departed” the board of directors.
Just weeks before the suspension, REDjet announced it had begun flying to St Lucia. It also operated a regular service to Trinidad and Jamaica and had announced it was to begin flights to St Maarten in May.
The regional aviation industry retains heavy government ownership, control and direction, with Trinidad and Tobago’s Caribbean Airlines/Air Jamaica and LIAT often in the grips of labour disputes, heavy losses, cash bailouts and customer dissatisfaction.
But since REDjet’s arrival the two island-hopping carriers stepped up competition in pricing and scheduling.
“We have seen other carriers drastically cut their fares in an effort to shut down REDjet and return to high fares and business as usual with no regard to the negative impact on travellers. Unlike us, they do not have to be profitable to stay in business,” REDjet said.
“In spite of their subsidised efforts, our passenger numbers have continued to rise,” the airline added.
The airline’s supporters say the low-cost model would spur greater intra-regional travel and tourism and offer more options for traveller. Critics remain unconvinced that a low-cost business model can fly regional skies, already the graveyard of several similar upstart carriers over the last two decades.
REDjet has at once chided regional governments for their support of rivals and urged them to help. But so far, no regional governments have indicated they intend to bankroll the airline.
Apart from generating unprecedented press notice, REDjet’s entry into the aviation marketplace has already scored several coups in intra-regional travel beyond the low-cost model. It joined Caribbean Airlines in offering inter-island jet travel and made heavy use of social media marketing.
Within a week of launching in May, the airline’s Facebook page had already surpassed 16,000 supporters. It has introduced ticket sales through cellphone kiosks and began flying the West Indies cricket team during their home series with Pakistan and India.
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