Fares flying low
The appearance of low-cost carrier REDjet in relations between the countries of CARICOM has tossed up several issues, especially the conviction by the public that the cost of air travel in the region is exorbitant.
The complaint about the high cost was being made well before REDjet made an appearance. At one point, it caused LIAT – the airline owned by the governments of Antigua and Barbuda, Barbados and St Vincent and the Grenadines – to publish its fare structure, which revealed that government taxes on flights originating in most countries are extremely high.
So, the first point is that the cost of air travel within the Caribbean is high in part because government taxes are high. LIAT, incidentally, is a huge contributor to the revenues of governments into whose countries it flies. In some countries, it is the biggest contributor of landing fees to government earnings.
The cost of LIAT’s operations when compared with that of Caribbean Airways Ltd (CAL), the successor airline to BWIA and owned by the government of Trinidad and Tobago, is higher because of one very important reason. LIAT has to buy its fuel at commercial prices but the government of Trinidad and Tobago subsidizes fuel to CAL – not just the fuel it buys in Trinidad but fuel wherever bought for all its operations. LIAT (and incidentally REDjet) is suffering from an unlevel playing field in the context of the fuel subsidy that CAL alone enjoys.
In 2008, the last year for which audited statements were laid before the Trinidad and Tobago Parliament, the fuel subsidy for CAL was US$36 million on consumption of 26 million gallons.
It appears that the travelling public in Trinidad and Tobago is more loyal to their pockets than they are to CAL. According to the chairman and CEO of REDjet, Ian Burns, the demand for bookings from July 28 when the airline starts flights into Trinidad is more than when they first launched on April 13.
In the wake of a successful lawsuit by REDjet in the courts of Trinidad and Tobago, the airline was given clearance to fly into Trinidad and then, separately, Jamaica gave permission. But, these permissions came only after the most amazing filibustering by both governments. Few people believe that the refusals, denials and demands for safety checks were anything more than measures to protect CAL from competition.
Remarkably, chairman of CAL George Nicholas has now indicated that the airline will be lowering its fares. He is adamant it is not doing so because of competition from REDjet. He says: “(The) efficiencies that we get now with joining with Air Jamaica, common fleeting, the use of one reservation system, pooling our intelligence and pooling our resources, so we have economy to scale that very few carriers in the region have.”
What is truly remarkable about Mr Nicholas’ statement is that he has identified efficiencies arising from the “joining with Air Jamaica” as the basis for dropping fares.
This same notion of the nationally-owned Caribbean airlines “joining” a shared arrangement to reduce costs and decrease fares has been suggested time and again without an appropriate response.
If CAL, Air Jamaica and LIAT had sat down to share out the routes within the Caribbean and into it from external locations, and to divide up some operational costs, the three airlines could have had a chance to serve the region’s people and its tourism better.
Instead, what the Caribbean public saw was a display of selfish nationalism at the political level in Trinidad and Jamaica, crude boardroom politics, and a disregard for the Caribbean travelling public and tourism.
As Ian Bertrand, a regional airline exper, puts it: “Imagine CARICOM countries knew for years that the Multilateral Air Services Agreement was incompatible with the Revised Treaty of Chaguaramas (the CARICOM treaty) and did nothing. Imagine that despite recent political statements embracing open skies, the very recent bilateral discussions between Trinidad and Tobago and Barbados did nothing to change the closed sky structure of their Air Services Agreement.”
REDjet may have been given permission to fly to Trinidad and Jamaica, thereby adding to their Guyana route, but that is only a battle. A real war is yet to come unless good sense infects the thinking of CARICOM’s leadership and a sensible aviation policy is established, taking account of both commercial realities and public good. One of those realities may be an examination of the value of the REDjet model. Another would be the establishment of a CARICOM Aviation Authority to set common aviation rules throughout CARICOM, funded by CARICOM-wide aviation charges.