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With Oil Now Dropping to US$40+ A Barrel, WHY Have LIAT’s Fuel Surcharges Not Been Further Reduced?

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Submitted by Adrian Loveridge

Buy the cheapest currently available return airline seat from Barbados to St. Lucia and you will pay US$200.45. Of that figure US$125.45 are passenger facility charges, VAT, Airport Departure taxes (US$52.50) Airport Authority or Passenger tax and a massive US$47.50 in fuel surcharges and insurance.

  • First of all I wonder how consumers would respond, if hotels and other tourism partners starting showing insurance as an additional add-on?
  • Secondly, exactly what is the current fuel cost of flying a full Dash 8 to St. Lucia from Barbados and back?

Less than US$2,375 or the fuel surcharge applied methinks!

So when exactly is LIAT going to pass on their fuel savings? They chose to run to the media when a token reduction of US$5 came off previous surcharges. Now that the cost of oil is nearly a quarter of price paid a few weeks ago, how much longer will it take to respond? Is this another case of price gouging? And as LIAT is owned by a number of Caribbean Government’s are they complicit in that price gouging?

Many airlines have already substantially reduced or totally eliminated fuel surcharges, so have cruise ship companies, but not LIAT!

So many questions!

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28 responses to “With Oil Now Dropping to US$40+ A Barrel, WHY Have LIAT’s Fuel Surcharges Not Been Further Reduced?”

  1. John Da Silva Avatar
    John Da Silva

    Airlines hedge the cost of their fuel by locking in a price for a future period of time. LIAT may have hedged at when fuel was high and going higher, so they may now be paying a much higher price that the current market price, so it could be a while before lower fuel prices are reflected in lower ticket prices.

  2. Straight talk Avatar
    Straight talk

    Long John de Silva,

    Is it practicable for LIAT to announce their locked in price, or may that be too controversial.
    Our government being a major shareholder in this lame duck airline should release these fuel cost figures and offer an explanation why our local gas prices are reducing proportionately but not our inter-regional airfares.

    We, the taxpayers, are subsidising this scam with next to zero accountability from the company.

  3. David Avatar
    David

    Given the fact that oil price has been on a spiral for six months now we find it hard to believe that LIAT would be blessed with so much cash flow to lock in at a future price for such a long period that it is now caught out in the cold.

    No way!

    This is a case of LIAT recouping earlier losses and they must be doing it with the blessings of their Board and by extension the government of Barbados, its largest shareholder.

  4. The Scout Avatar
    The Scout

    Imagine, it is cheaper now to fly to England, than to most of the Caribbean islands. Are we really serious about CSME or CARICOM?
    It is also cheaper for some tourist from Britain to come to some of the islands than for a bajan to get there.

  5. Micro Mock Engineer Avatar
    Micro Mock Engineer

    I too would be surprised if LIAT had sufficient capital to do that much hedging… but it would be interesting to know their hedging strategy. I hope they weren’t listening to Bush Tea and Straight Talk when hedging on fuel prices.

  6. BAFBFP Avatar
    BAFBFP

    Adrian Loveridge

    As man, Wha’ you think ’bout Gene Holder?

  7. Straight talk Avatar
    Straight talk

    MME:

    Es tu Brute.

    Tell us about your investment in oil.

  8. CENTIPEDE Avatar
    CENTIPEDE

    you’re asking about air fares.

    Isn’t it a Caribbean shame that the ONLY way to get from one island to the other is by ‘plane? After all this time?

    How is it there is no transportation by sea? What has become of the ‘ferry’ we heard Thompy talking about?

    I suspect the reason there is no inter-regional travel by sea is Goverment Bureaucracy.

    Honestly, in many respects, we Caribbean people still live in the Middle Ages…

  9. David Avatar
    David

    Seem to remember Trinidad was required to deliver a report to a CARICOM sub committee on starting up a sea transport system. Trinidad has some experience with it at the moment because of a see transport system between Trinidad and Tobago.

    As you would expect something as commonsense as establishing an alternative transportation system in the reason will take years to get off the ground and by the time it does there will probably be a better way.

    The other issue is how would a sea transport system would impact on the LIAT business model?

    The other issue is T&T’s commitment to forming an alliance with the sub-region we know as the OECS. Are they still on board with the idea of supporting the sea transportation system?

  10. .22 Avatar
    .22

    CENTIPEDE: “I suspect the reason there is no inter-regional travel by sea is Goverment Bureaucracy. ”

    That issue has gone silent for sometime. Promises, Promises, Promises.

    *eek… roll eyes*

  11. CENTIPEDE Avatar
    CENTIPEDE

    So wait, “sea transportation may impact on the LIAT business model… ” meaning, then, that Caribbean are condemned to paying through their noses until the end of time because it may interfere with the inept LIAT Company?

    This kind of thinking, which belongs to kindergarden children, is what has held us in bondage all this time.

    And you said… “As you would expect something as commonsense as establishing an alternative transportation system in the region will take years to get off the ground and by the time it does there will probably be a better way.”

    I can fully support your contention that, as a commonsense thing … it will take years to get off the ground… we will have to have a panel of experts look into it, and await a ‘report’ from them.

    But what is intriguing is your comment “by the time it does there will probably be a better way.”

    Hmmmmm. I was wondering … we can fly, go by boat, or swim. What other ways can you suggest? Maybe teletransportation and some methods we see in Startrek and various scifi movies?

    By the way, have you ever heard of the Federal Palm and the Federal Maple?

  12. Robin Hood Avatar
    Robin Hood

    Beam me up CENTIPEDE

  13. Micro Mock Engineer Avatar
    Micro Mock Engineer

    LOL ST… Do you mean my warnings of the oil bubble bursting and the short positions I had been advocating from the time it crossed $130 per bbl back on May 21? I believe oil prices will continue their slide to the $20-$30 range, but for now my focus is now on choosing the best underpriced stock in the wake of this financial crisis. Like Buffet says “Be fearful when others are greedy, and be greedy when others are fearful”.

  14. The Scout Avatar
    The Scout

    Centipede
    If these people are really serious about CSME, it is time that I should be able with the correct documentation, drive my vehicle on to a ferry, go to a CARICOM country do my business or holiday, and return

  15. Adrian Hinds Avatar
    Adrian Hinds

    I have notice the silence of all the “Peak Oil” believers, and other who saw the near 200 per barrell oil price as something other than greed, and manipulation.

  16. BAFBFP Avatar
    BAFBFP

    I shouted market manipulation for years but make no mistake, peak oil is still very relevant (and so too is competition from alternatives, US dollar capitulation etc). Don’t think the factors have changed, just the degrees of influence.

  17. CatScan Avatar
    CatScan

    Adrian, no matter what is going on oil is still a finite resource. So at some point in time the prices will start to go back up. We are just experiencing a temporary reprieve. We should not get complacent. I remember discussing Peak Oil 8 years ago and being scoffed at.

    The issues will return, we should use the lower oil price now to prepare for when it again goes back up.

  18. CatScan Avatar
    CatScan

    Continuing from my last post, with oil at around $40/bbl the oil companies are not going to invest in new wells etc. So when things start to tighten up again it will be worse. The supply then will be tighter hence higher than $150/bbl. We really should invest as much as we can into renewables, smaller, higher mileage vehicles and self sufficiency.

  19. The Scout Avatar
    The Scout

    CatScan
    You must also take into consideration the fact that auto manufactureres are investing in fuel efficient vehicles using clean fuel, therefore reducing the use of petrol of any kind. I predict that within the next ten years we would have petrol free vehicles on the road.

  20. Adrian Loveridge Avatar
    Adrian Loveridge

    CatScan,

    I understand what you are saying, so should LIAT borrow lots more money and buy forward at US$40 a barrel?

  21. Tourism Monkey Avatar
    Tourism Monkey

    Isn’t it a Caribbean shame that the ONLY way to get from one island to the other is by ‘plane? After all this time?
    —————————————
    I thought that same thing when visiting St. Vincent earlier this year when I saw the beauty of getting onto a ferry and being whisked to another island in about an hour.

  22. Iain Edghill Avatar
    Iain Edghill

    Not long ago I was in the Canary Islands and saw one of those twin-hull, high-speed jet ferries which ply their trade between the islands at a top speed [so I was informed] of around 45-50 kts.

    Would something like that be feasible in the Caribbean? I mean, 2 hrs from Barbados to St. Vincent would be cool! With around 40 cars and 300 passengers in airline-like seats.

    Remember the Flying Fish Hydrofoils that did some feasability tests back in the early 60’s? Those things are still running in the Aegean Sea. Why not the E. Caribbean?

  23. Iain Edghill Avatar
    Iain Edghill

    Here is the link that shows the Fred Olsen Express ferry.

    http://www.eurosol.com/ferries.htm

  24. CENTIPEDE Avatar
    CENTIPEDE

    Hey Tourism Monkey / Iain – you got to remember that in Europe you’re dealing with pragmatic thinkers. The Caribbean ‘experts’ are still in the Middle Ages. (along with the ‘pastors’ and most church congregations.)

    BTW – ain’t Star Boy Loveridge real quiet these days? Anybody wanna wonder why?

  25. BAFBFP Avatar
    BAFBFP

    He is a Government consultant. Frankly I am glad

  26. Adrian Loveridge Avatar
    Adrian Loveridge

    The reason I have been so quiet is because I have been so busy.

    Take the last 14 days.

    7 days in Argentina
    3 full days with board and other meetings.
    6 hours last Friday escorting Tour Operators and attending identified school to be painted by them.
    This morning 4 hour church service (Tourism Week) and travel to get there/back.

    Don’t get be wrong, I am very happy to have the opportunity and hope that I can contribute something positive.

    And BAFBFP – I think consultants get paid.

  27. CENTIPEDE Avatar
    CENTIPEDE

    Hat’s off to you Sir Adrian – keep us updated.

  28. Anon Avatar
    Anon

    YES! Gas prices down again.

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