This week we witnessed two decisions that demonstrate the possibilities and the challenges of uniting the Caribbean people.
The decision by Caribbean Airlines to resume flights out of Kingston to cities in the United States and Canada, and between Jamaica and Barbados is welcomed news for an airline that has been bleeding cash due to the curtailment of its operations.
According to a press release from its CEO Garvin Medera, starting next Monday Caribbean Airlines will be resuming international and regional scheduled flights, on a phased basis, out of its Jamaica hub.
It must be remembered that Caribbean Airlines acquired Jamaica’s former national airline, Air Jamaica and the Jamaican government is a minority shareholder in CAL. Therefore CAL is effectively Jamaica’s national carrier.
The fact that the Jamaican government has moved to re-open its borders as it tries to assist its ailing economy must mean that CAL has to ensure it remains an important carrier in the market.
CAL is also constantly fighting for market share and has done well to maintain a major presence in the Jamaican market and while initially, Air Jamaica’s legacy operations were a drain on CAL that time has long past with the airline cutting unprofitable routes out of Kingston and having a leaner operation.
It is therefore unfortunate that we have heard some uninformed comments that CAL is burning money and being supported by the government-backed US $63 million loan and therefore should not reopen in Jamaica first.
The decision to return to Kingston is precisely to limit the burn rate of the airline’s cash and to start to prepare it to return to the skies as the region’s top carrier. If there is one thing that the COVID-19 pandemic ought to have taught us is when it comes down to brass tax the region is on its own and together it is possible to find solutions to the challenges we face.
The other decision that occurred this week was an announcement that regional airline Liat will have to be liquidated and a new entity formed.
According to Antigua’s Prime Minister Gaston Browne COVID-19 increased the regional airline’s losses exponentially. “So whereas in all of 2019 Liat made a loss of about EC$12 million, that was within the means of the shareholder governments to subsidise,” Browne told a radio programme in Antigua.
He added, “You would have found that since COVID, the planes have been grounded, they have to pay the lease payments and they are not getting any revenue. A decision will have to be made to collapse it and then maybe the countries within the region will have to come together to form a new entity.”
Brown was correct in his statement that the region cannot move forward without a form of connectivity and “you cannot have an integration movement if people cannot connect.”
“What I’m hoping that we do not have going forward with the new entity, is any squabble over the location of the headquarters, at the end of the day, the only service that Antigua and Barbuda has enjoyed…within Caricom (Caribbean Community) is Liat and this has been the case for several decades. So I just hope that we are not going to have countries within the region opportunistically fighting us to get the headquarters in their country to displace Antigua and Barbuda,”
There are a couple of issues that arise from the seeming demise of Liat. The first is the cost of intra-region travel.
Why for a half hour flight to Barbados or Grenada cost somewhere between US$350 and US$500 return? You compare that cost to a flight between T&T and Miami and you see how the math just does not work.
Part of the challenge is that regional governments apply hefty taxes which make it difficult for airlines to reduce the cost of flights and act as a disincentive to regional travel. The demise of the airline also points to the failed policies of regional governments having too much influence on the operation of the airline.
The prime minister’s first instinct is to protect Antigua as the base of the airline. He does that on the notion that it is one of the few benefits that the people of the Caribbean country receive from their membership in Caricom.
Surely the prime minister exaggerates and obviously ignores the benefit of regional institutions, including but not limited to, the University of the West Indies and the Caribbean Development Bank.
But one can understand the issue of jobs and contribution to the economy and while one can sympathise with PM Browne his remarks show the kind of unilateral stance that does not help the region.
The question has to be asked, should regional governments continue to operate the airline, and can something be put in place to ensure that connectivity continues to the smaller territories like Dominica while employing private capital?
Can regional governments see the big picture that less tax revenue from airlines may lead to more revenue from hotels and guest houses?
We have to as a region get away from insularity and support regional businesses, not by trying to own and operate them but providing the kind of regulatory support they need.
We recently saw where regional cement maker TCL had to fight tooth and nail to try and keep jobs in the region and generate foreign exchange while fighting off cement imported from Turkey.
I am an absolute believer in free enterprise and entrepreneurship but I also feel we need to protect and help grow local and regional businesses and not just be importers of that we can produce successfully here.
Perhaps the Liat debacle will lead to the formation of a single regional airline but if it is to happen CAL must ensure that it does due diligence before it even ponders any such deal.