Will T&T lead the Caribbean?

There is an unfortunate pride that is linked to owning national airlines in the Caribbean. It is a pride that goes before a fall.

Successive Jamaican governments held on to Air Jamaica although the airline bled money and depended heavily on massive financial support from tax payers. The taxpayers’ money could have been used to finance sustainable projects that would have created and maintained employment and generated revenues.

But in the minds of decision-makers in successive Jamaican governments keeping Air Jamaica flying was important for national pride.

It was not until the Jamaican economy reached stagnation and the government had no choice but to approach the International Monetary Fund (IMF) for loans it could get nowhere else, that Air Jamaica was finally sold with the insistence that the Air Jamaica brand be maintained.

The airline was sold to Caribbean Airlines – another state-owed enterprise; in this case the government of Trinidad and Tobago.

The insistence by the Jamaica government to maintain the Air Jamaica brand at least for the flights plying the Jamaica route was more illusory than real. Effectively, Air Jamaica had ceased to exist, but keeping up the appearance that the national symbol remained intact seemed important.

In its previous incarnation as BWIA, Caribbean Airlines was also a heavy loss-making airline. Like Air Jamaica, BWIA was kept operational only through huge subsidies by governments using tax payers’ money. The reasons in Trinidad and Tobago for propping-up an airline, which would have collapsed and disappeared if it were privately-owned, were the same as in Jamaica – a false pride in the existence of a national airline which, in the minds of some decision-makers, demonstrated the “power” of the country in the international community. Of course, the “power” was an expensive illusion.

As in Jamaica with Air Jamaica, the money used to prop-up BWIA could also have been used in Trinidad and Tobago on projects to improve the lives of the majority of citizens of the country.

Finally, six years ago, the Trinidad and Tobago government – bleeding from the large sums of money being sunk into BWIA – decided to collapse the airline and to restart it as Caribbean Airlines. Like the government of Jamaica which took up the debts of Air Jamaica when it was sold to Caribbean Airlines, the government of Trinidad and Tobago absorbed the debts of BWIA.

Caribbean Airlines, therefore, started with a clean slate, and with considerable continuing support from the government in the form of a fuel subsidy. That fuel subsidy gave Caribbean Airlines a significant advantage over competing airlines, including – within the Caribbean – the small airline, LIAT. LIAT is also owned by governments, mostly the governments of Barbados, Antigua and Barbuda, St Vincent and the Grenadines and, more recently, Dominica. LIAT is also losing money.

Losses

Despite starting off with no debt and a substantial fuel subsidy, Caribbean Airlines is now reportedly losing money. The losses are put at US$43.6 million in 2011 and another US$83.7 million in 2012.
The reasons offered for the losses are linked to an ambitious plan to compete with British Airways on flights between London Gatwick Airport in the UK and Trinidad, for which 767 aircraft had to be wet-leased, as well as the financing of five ATR 72 turboprops that are being used on Caribbean routes – mostly in competition with LIAT.

Caribbean Airline’s mounting debt is now said to be in the vicinity of US$200 million, and unless the government of Trinidad and Tobago is prepared to throw considerably more tax payers’ money at it, the airline could face bankruptcy.

The business of nationally-owned airlines in the Caribbean has long been costly and vexed.  Hence, angst is being expressed in Jamaica over Caribbean Airline’s decision to cut the number of flights into Jamaica from the United States on the basis that they are unprofitable. And the governments that own LIAT are bitter over LIAT’s rising debt in its efforts to compete with Caribbean airlines and its subsidised fuel.

Unfortunately, the solution to the problem has never been sought in a collective approach by the 15 governments that constitute the Caribbean Community and Common Market (CARICOM).  Even though the idea of a regional airline – jointly owned by all the governments of CARICOM – was a prime objective of the regional grouping going back to its infancy in 1968, the urge of political one-upmanship dressed-up as national symbolism skewered attempts to fashion a regional airline.

There are some experts who feel strongly that a “Caribbean” airline is necessary if only as a means of countering foreign carriers that could cherry pick lucrative routes and arbitrarily set the frequency of flights as well as prices. There may be some merit to that argument, although there are many successful tourism destinations in the world that do not have national airlines; they have depended entirely on the competitiveness of their destination to attract foreign carriers at no cost to themselves.

Vital service

There is a more compelling argument for a regional airline that serves the interest of CARICOM by transporting goods and Caribbean people involved in the commercial activity of the region as well as its social intercourse. An airline providing inter-Caribbean links for tourism also continues to be a vital necessity.

The virtues and merits of a regional airline have been stated time and again, and more than one expert report exists on how it could best be achieved. Its achievement depends now – as it has done in the past – on political will by the leadership of CARICOM, and, at this time, more particularly the government of Trinidad and Tobago which is in the best position to give leadership.

The starting point must be a readiness to accept the idea that successful national airlines is a non-starter, and that the government resources they absorb could be better spent on sustainable projects that would lift the standard of living of the mass of people.

In setting the notion of national airlines aside, CARICOM governments could then focus on the crucial need to provide, on a joint and collective basis, a regional air transportation system that serves the interest of the region.

In light of Caribbean Airline going the way of BWIA and Air Jamaica, the Trinidad and Tobago government has a chance to lead the region to a regionally owned and operated airline dedicated to limited and necessary operations in the Caribbean’s collective interest.

(The writer is a Consultant, Visiting Fellow at London University and former Caribbean Diplomat. Responses and previous commentaries: www.sirronaldsanders.com)