Tue Nov 12, 2013

by G. E. M. Saunders

LIAT, the Caribbean airline, is once again under the regional microscope, as it continues to be plagued with industrial relations, communication and customer service issues. The real frustration for the regional traveller is not just limited to the delays and travel inconveniences, but the lack of a clear understanding of the reason behind these continual stand-offs between management and its employees, in particular its pilots.{{more}}

Is there a problem with the organizational structure of the airline? Is there a difficulty with attracting experienced and competent aviation professionals? Are the recent job adverts indicative of recent staff turnover or does it represent a new strategic direction for LIAT?

Shouldn’t there be more accountability and disclosure to the regional travelling public who incidentally are the de facto owners of LIAT, through their respective Governments? While we have accepted the use of tax dollars to subsidize what is clearly an essential regional service, don’t the taxpayers of these territories deserve better?

Is there need for an independent mediation/oversight board with members from the private sector of each island? Could this board be charged with the responsibility of facilitating harmonious labour-management relations and ensuring that management does not take advantage of its employees and that employees are not unreasonable in their demands? The objective here would be to ultimately secure some level of stability and efficiency, by holding the LIAT board, management, staff and pilots to predetermined standards and targets.

This is not, however, to diminish the obvious challenges associated with profitably running an airline between these islands. For this reason, the call for competition or an end to LIAT may not be the solution. It must be understood that any alternative to or competition for LIAT will inevitably be faced with the same physics and economics of aeronautics and aviation in this subregion.

The harsh reality is that the increased fuel burn associated with having to take off and land every thirty minutes or so leaves little scope for the fuel saving normally associated with cruising altitudes and speeds. This reality, among others, makes the airline’s operational cost per mile higher than ideal.

We have also found ourselves in this situation not for want of competition; several private sector airlines, including Carib Express, Redjet, American Eagle, Air Jamaica, Caribbean Star and Caribbean Sun have all had their opportunity and seemingly could not survive these harsh realities.

It seems therefore that we must accept the reality that the airline business in the subregion is not a simple undertaking and will inevitably challenge any owner. It also seems that until the right formula for fleet sizing and route servicing is reached, aircraft operations will have to be subsidized, if ticket prices are to remain at affordable levels. Since no private enterprise can be expected to operate at a loss, only our regional governments can and will be expected to subsidize this operation.

It is therefore also pointless to make heavy weather of any comparison between intra-regional and international ticket prices. The build-up of the different charges on the airline ticket is not unique to LIAT or the regional airports. A recent Caribbean Airlines ticket purchased in the USA has an even more substantial build-up. Every ticket out of the USA comprises an airline insurance service fee, a September 11th security fee, a transportation tax, an Animal & Plant Health Inspection Service user fee, an immigration user fee, a customs user fee, a destination concourse fee and a destination passenger service charge, all totalling some US$130.

The existence of all of these charges is a clear indication of the importance that the governments of developed countries place on cost recovery and the sustainability of both airport and airline operations. SVG and indeed the region can either follow suit or use more of our tax dollars to contain ticket prices.

The optimal fleet sizing formula may well be achieved by LIAT’s planned move to more efficient aircraft and regional jets, where any profit generated from the longer distance travel can be used to subsidize the losses on the shorter routes. But is that not what a LIAT-Caribbean Airlines (CAL) merger should be all about?

Prime Minister Kenny Anthony’s recent lamentation was not just about the state of regional economies, but about the more fundamental issues of insularity and lack of functional regional cooperation. In order for a LIAT/CAL “one Caribbean airline” marriage to take place, the “Greater Antilles” of Trinidad and Tobago and Jamaica will somehow have to participate in improving the lots of the “Lesser (OECS) Antilles”. Only time will tell.