It was less than a week ago that I re­turned from a short va­ca­tion to Or­lan­do, Flori­da, with my fam­i­ly. We trav­elled with Caribbean Air­lines Ltd (CAL) for sev­er­al rea­sons:

1. It is the on­ly air­line that pro­vid­ed di­rect flights be­tween Trinidad and Or­lan­do

2. It was the cheap­est at the time of book­ing

3. It was the on­ly air­line to al­low pas­sen­gers two 50-lb lug­gage al­lowance

4. It was the on­ly air­line to pro­vide a com­pli­men­ta­ry meal

5. It was the on­ly air­line to pro­vide free in-flight en­ter­tain­ment

Dur­ing the process of check­ing in, board­ing and fly­ing, I re­called a re­cent news­pa­per ar­ti­cle that sug­gest­ed that CAL was $100 mil­lion in the red and, at times, I pon­dered what risks this might en­tail. I looked at the em­ploy­ees and at­tempt­ed to com­pre­hend their state of minds as they per­formed their du­ties know­ing that their jobs may be at stake, the po­ten­tial for in­creased stress lev­els and the ef­fect on the qual­i­ty of their ser­vice de­liv­er­ables in this crit­i­cal, high-risked in­dus­try.

I re­called the events of 2005 when Delta air­line filed bank­rupt­cy and im­me­di­ate­ly all its air­craft were ground­ed. But Delta has now risen as one of the most prof­itable air­lines. Why can't CAL fol­low suit af­ter its pre­de­ces­sor BWIA has gone bank­rupt and gov­ern­ments have in­ject­ed huge sums of cash in­to CAL? More so, Air Cana­da has more re­cent­ly can­celled its di­rect flights to T&T, cre­at­ing more space for CAL in this lu­cra­tive mar­ket.

Re­cent re­ports that CAL has net­ted US$43 mil­lion loss in 2011 and US$83 mil­lion loss in 2012 is alarm­ing, if not con­fus­ing. No­tably, my flights to and from Or­lan­do were full to the max. This is true for most flights be­cause on­line reser­va­tions for many flights in­di­cate less than ten seats left. It is al­most im­pos­si­ble to get a flight to To­ba­go if not booked at least two weeks in ad­vance.

The prof­it equa­tion in its sim­plic­i­ty is prof­it = rev­enue � costs. The cost struc­ture for any air­line is cer­tain­ly com­plex, but one can rea­son­ably as­sume that ma­jor costs will be at­trib­uted to land­ing rights, air­craft main­te­nance, fu­el and staffing. But these costs are not unique to CAL, which en­joys the ad­van­tage of fu­el sub­sidy, the re­lief of a ma­jor fi­nan­cial bur­den. The crit­i­cal ques­tion that must en­gage the au­thor­i­ty is sim­ply: how is CAL man­ag­ing its costs? Rev­enue is a func­tion of de­mand for ser­vices, and un­doubt­ed­ly, the ma­jor rev­enue stream for CAL, which is sales of tick­ets, is in no way be­ing sti­fled.

While opin­ions vary on the ac­qui­si­tion of Air Ja­maica, when one ex­am­ines the routes that CAL is able to cap­i­talise on by this ac­qui­si­tion, it cer­tain­ly gives CAL a com­pet­i­tive edge.

Con­sid­er­ing US des­ti­na­tions, apart from its Mi­a­mi flights, CAL is the on­ly air­line that of­fers reg­u­lar, di­rect flights from T&T to Ft Laud­erdale, Or­lan­do and New York; ma­jor des­ti­na­tions for Caribbean trav­ellers. To get to these des­ti­na­tions with CAL's clos­est ri­val Amer­i­can Air­lines (AA) re­quires trans­fers in Mi­a­mi, a gross in­con­ve­nience in terms of time and has­sle to most trav­ellers.

CAL is al­so the on­ly air­line with reg­u­lar non-stop flights to Cana­da. Unit­ed Air­lines and AA trav­ellers must trans­fer in Hous­ton and Mi­a­mi, re­spec­tive­ly, spend­ing as much as 13 hours trav­el­ling com­pared to six hours with CAL.

In the Caribbean, CAL of­fers the most com­pre­hen­sive routes of in­ter-Is­land ser­vices. It is there­fore well-po­si­tioned to ef­fec­tive­ly dif­fer­en­ti­ate its ser­vice of­fer­ings from oth­er car­ri­ers.

CAL cer­tain­ly en­joys busi­ness ad­van­tages in the routes that it serves. There­fore, why is CAL still re­port­ing huge loss­es? How can CAL ad­dress this prob­lem?

On­ly a very de­tailed in­ves­ti­ga­tion in­to the op­er­a­tion of CAL can re­veal caus­es and pos­si­ble so­lu­tions, but news­pa­per re­ports on pos­si­ble ini­tia­tives from var­i­ous sources must be of con­cern:

1. "Clos­ing Air Ja­maica routes be­cause they are prov­ing un­prof­itable." This on­ly makes sense if un­prof­itabil­i­ty is due to non-trav­ellers. If flights are filled, then loss­es must be due to bad man­age­ment.

2. "CAL will cut jobs in its Ja­maican op­er­a­tions this week." Has some form of study in­volv­ing cost-ben­e­fit analy­sis been com­plet­ed to de­ter­min­ing whether this is an eco­nom­i­cal­ly fea­si­ble move? Will CAL be get­ting rid of ex­pe­ri­enced staff with ir­re­place­able in­sti­tu­tion­al knowl­edge, re­duc­ing valu­able hu­man cap­i­tal and, hence, es­ca­lat­ing the ex­ist­ing prob­lem?

3. Fi­nance Min­is­ter in­di­cates re­struc­tur­ing the air­line. What does this re­al­ly en­tail?

4. If CAL is pri­va­tised to­mor­row, will it still make a loss?

It is im­per­a­tive that the Gov­ern­ment move swift­ly to curb this bud­ding eco­nom­ic nui­sance, which has all the sup­port­ing el­e­ments to be eas­i­ly trans­formed in­to a cash cow.

Dr Ram­c­hand Ram­per­sad

?via e-mail