The visible hand of Adam Smith at AIA

Editor: A recent announcement by Caribbean Airlines (CAL) that it would be offering two regularly scheduled flights a week between the new Argyle International Airport (AIA) and John F Kennedy Airport (JFK) in New York City, beginning April 14, 2017, has received little attention, and deservedly so.

Rather than being “a big frolicking deal,” as Professor Garrey Dennie put it, in an essay titled “The invisible hand at Argyle International Airport” (Searchlight newspaper, April 13, 2017, p. 12), in homage to the 18th century economist Adam Smith, it represents business as usual for air travel to and from the mainland.

This is partly because it was false for CAL to claim that it is, “… one of the first airlines to offer non-stop flights to the new airport, which also serves as an international gateway to the Grenadine Islands,” given that LIAT has serviced AIA since its February 14 opening, as have SVG Air and Mustique Airways.

It was also deceptive for CAL to claim that, “Customers will also benefit from seamless connections between St Vincent and the Grenadines and Caribbean Airlines’ other international and regional destinations,” because the airline will not fly to the Grenadines and the “seamless connections” to regional and international destinations require a plane and luggage transfer to and from Trinidad on CAL’s ATR aircraft, a service almost identical to what has been offered for decades by LIAT.

Moreover, the “seamless CAL connections” involve flying 286 km south from AIA to Piarco International Airport and then north to JFK, often with two stops and/or up to 16 hours of layover in various departure lounges.

Equally important, these same “seamless connections” could have been easily provided at the now shuttered ET Joshua International Airport at Arnos Vale, but the Government never allowed this to happen.

The CAL decision to service AIA in an indirect and one or two-stop fashion should also remind us of what transpired on February 21, when New York bound passengers chose more convenient routings, as reported by Caribbean News Now:

“[Dynamic Airways] Passengers [refused to book the February 21 flight to JFK from AIA because they] were apparently turned off by the fact that they would have had to transit in Guyana for seven hours before flying back to New York – arriving in Georgetown at 9:30 a.m. and leaving at 4:30 p.m.”

Finally, it is erroneous for Professor Dennie to claim that, “Competitive flights between JFK and Argyle International Airport (AIA) have arrived and the market will be changed, irrevocably so” and that “… the market is already yielding competitive ticket pricing for travelling to and from St Vincent and New York,” because there is no evidence that these flights will lower travel costs or encourage more tourist visits, if only because they ignore the theory of comparative advantage, a set of ideas developed by another great economist, David Ricardo. In fact, the cost of true non-stop return flights from JFK to St Lucia, SVG’s closest neighbour (67 km between their international airports), April 23-30, via JetBlue and United Airlines is $US 591.56; the indirect, one and two-stop flights on the same dates to and from SVG from JFK using Caribbean Airlines is $US 769.56, or 30 per cent higher.

It is also certain that Adam Smith (whose writings lead to the theory of comparative advantage) would have immediately recognized that both CAL and LIAT are highly indebted and inefficient government-owned operations that do not have the market discipline or managerial competence to lower their operating costs and fares, regardless of what market competition they face.

C ben-David