TOURISM MATTERS – Changes may pose problems for LIAT
LIKE?THOUSANDS of people around the region, I share the excitement of impending competition and all the benefits it will hopefully bring to us with the launch of REDjet.
Frankly, it could not come at a better time as we face the daunting prospect of a near eight-month softer summer season.
According to its chief executive officer Ian Burns, “fares from US$9.99 one-way” will be available; they will also be “launching 250 000 seats for US$49.99 or under”.
Our Government should be happy too – if the majority of those seats transit or are purchased in Barbados, Government will collect up to a whopping $15 million in departure taxes and what could be another $4.37 million in VAT.
Lots of discussion has taken place regarding the potential commercial damage to LIAT by REDJet, and clearly they will face some real competition on the Georgetown route.
However, I would have thought LIAT faces a far greater threat from Caribbean Airlines, especially after the recent announcement that the carrier “has officially signed a contract for the purchase of nine ATR 72-600 aircraft valued at some US$200 million to replace its current fleet of five Dash-8 300s”.
The European turboprop manufacturer confirmed that first deliveries will start in October 2011.
Whether these planes have been purchased on any preferential or subsidised financial terms is unsure.
What we do know is that according to a former BWIA and CAL director, William Lucie-Smith, the airline did receive a fuel subsidy of US$43 million for the three years ended 2010 from the Trinidad and Tobago government.
Some publications have also indicated that these subsidies have continued this year at around US$6 million a month after the acquisition of Air Jamaica.
Meanwhile LIAT, with an ageing fleet averaging around 17 years and higher maintenance and operating costs, is forced to pay the world market price for fuel.
Clearly, it will be at a tremendous disadvantage as and when the ATR larger aircraft compete on the same routes.
In fact, the CAL turboprop fleet will move from a seating capacity of 250 to 702, a massive 180 per cent increase, presumably giving them a substantially lower seat cost per flown mile.
While this all goes on, it might surprise readers to know that if an article recently written by Vernon Khelawan in the Jamaica Observer is accurate, then the highly touted deal which would see Caribbean Airlines buying out Air Jamaica is yet to be consummated.
“As it stands, Caribbean Airlines has until April 30 the unfettered right, without penalty, to walk away from the deal.”
It added, “As far as the Trinidad and Tobago public is concerned, they have never been told whether or not any independent economic and operational analysis was undertaken to demonstrate the economic viability of the merged airline.”
One is left to wonder how a decision to commit to the purchase of nine new aircraft was made prior to any agreement being finalised.
If it has not been concluded, then you really have to think where this equipment could be viably deployed and if that would only add to the upcoming challenges for LIAT.
Adrian Loveridge is a hotelier of four decades’ standing.