Adrian Loveridge - Hotel Owner
Like thousands of people around the region, I share the excitement of impending competition and all the benefits hopefully it will bring to us with the launch of REDJET. Frankly, it could not come at a better time as we face the daunting prospect of near eight month softer summer season.
Our Government should be happy too, as if the majority of those seats transit or are purchased in Barbados they will collect up to a whopping BDS$15 million in ‘departure taxes’ and what could be another BDS$4.37 million in VAT.
Lots of discussion has taken place regarding the potential commercial damage to LIAT by REDJet, and clearly they will face some real competition on the Georgetown route. However, I would have thought LIAT faces a far greater threat from Caribbean Airlines, especially after the recent announcement that the carrier ‘has officially signed a contract for the purchase of nine (9) ATR 72-600 aircraft, valued at some US$200 million’ to replace its current fleet of five Dash-8 300’s. The European Turboprop manufacturer confirmed that first deliveries will start in October 2011. Whether these planes have been purchased on any preferential or subsidised financial terms is unsure.
What we do know is that according to a former BWIA and CAL Director, William Lucie-Smith, the airline did receive a fuel subsidy of ‘US$43 million for the 3 years ended 2010’ from the Trinidad and Tobago Government. Some publications have also indicated that these subsidies have continued this year at around US$6 million a month after the acquisition of Air Jamaica.
Meanwhile LIAT with an ageing fleet, averaging around 17 years, higher maintenance and operating costs are forced to pay the world market price for fuel. Clearly they will be at a tremendous disadvantage, as and when the ATR larger aircraft compete on the same routes. In fact the CAL turbo prop fleet will move from a seating capacity of 250 to 702, a massive 180 per cent increase, presumably giving them a substantially lower seat cost per flown mile.
While this all goes on it might surprise readers to know that if an article recently written by Vernon Khelawan in the Jamaica Observer is accurate, then the ‘highly touted deal’ which would see Caribbean Airlines buying out Air Jamaica is yet to ‘be consummated’. ‘As it stands, Caribbean Airlines has until April 30, the unfettered right, without penalty, to walk away from the deal’.
Adding, ‘As far as the Trinidad and Tobago public is concerned, they have never been told whether or not any independent economic and operational analysis was undertaken to demonstrate the economic viability of the merged airline’. One is left to wonder how a decision to commit to the purchase of nine new aircraft was made prior to any agreement being finalised.
If it has not been concluded, then you really have to think where could this equipment be viably deployed and would that only add to the upcoming challenges for LIAT?
What is Jack Warner up to?
Why would he go public that he does not know about REDjet?
Why would he say that because it was refused to fly into the US there is a problem?
Why would he ridicule the 9.9UDS fare on limited seats?
Hasn’t he heard about the budget airline concept before?
It is obvious this is a protectionist move my Jack Warner.
I wish Redjet much success, but I have doubt about the viability of their venture. First of all these two MD82 jets that they purchased from American airlines are vey old planes and are only profitable on mid-range flight not island hopping.That is why it is important that they get FAA clearnce to fly to the USA. Using a jet for short haulage on low frequency routes coupled with a high maintance cost and low fuel efficiency given the age of the planes does not seem a viable business model to me.They should have went for a newer version of bombardier Q400 or ATRs for island flights while used the MDs for the US destinations. It is therefore imperative that they meet ICAO standard so that they will able to fly to USA destinations. The Barbados civil aviation needs to step up their game.
@All…
Please note, empirically, the power of competition (so sorely lacking here in the Caribbean)…
REDjet announce that they are about to offer their service (after months of delay because of “Government Approval” requirements which never seemed to happen), and suddenly Caribbean Airlines are buying two full pages (four colour) in every Nation News and Advocate News every day since telling us about how they’ve just lowered their rates…
Then you’ve got “agents” here on the blogs spreading “Fear, Uncertainty and Doubt” (FUD), questioning the safety of the REDjet aircraft.
On might reasonably ask why CAL couldn’t offer the rates they’re now offering before REDjet were about to offer their service?
The answer, of course, is they could have…
But they didn’t because they didn’t need to…
Hmmmm….
With incidents such as this its now quite clear why we have category II airport.
http://www.nationnews.com/articles/view/airport-security-breach/
Competition is needed in the airline industry. I know someon wh just pais US@456.00 to come to Barbados for a 9 day vacation and RED Jet is offering about $US 128,oo. With those fares, intra regional travel will boom.
If one reads the statement put out by REDjet it would suggest that by the approval of the Barbados government to issue the go ahead i.e. REDjet has received the required regulatory approvals from the Air Transport Licensing Authority of Barbados under the air service agreements between Barbados and other states, including the air services agreement between the relevant countries, to commence current commercial activities REDjet has translated that to mean it has right of access to those air routes which are covered in the air service agreement. It is interesting CAL has responded the way it has by slashing fares.
@40 acres, doesn’t AA use MDs?
@David
Being awarded an Air Operator’s Certificate (AOC) from Barbados does not give Redjet the right to fly to other countries with which Barbados has and Air Service Agreement. Permission to operate between states must be granted from the both states. Redjet just can’t say “Hey, we’ve got an AOC and we’re coming in!” If a new charter service wanted to operate from the UK, they could not do so without permission from the Barbados government. It’s no different.
Once again the question of Caricom treaties have arisen, it seems the Treaty of Chagaramus is only acknowledged when it benefits other countries other than Barbados. We are still trying to come to an agreement on the fishing problem with T&T, also participation in the CCJ yet T&T wants to flood Barbados with their products and buy up as much of our businesses as possible. Jamaica also not interested in the CCJ yet all these countries can take the parts of the Treaty that suits them and demand rights. All these countries would like to MARCH into Barbados, send their children to our “free” schools from primary to universary, benefit from our “free” medcial scheme, even obtain assistance from our National Assistance Board and other agencies yet our products are not available in these countries, now our own airline going to other regional countries has become a problem. When will we realise that CARICOM is a JOKE,a total waste of time? Barbados would only realise that they are being used when all these regionalists are well entrenched in the country, and they would challenge bajans for the right to be equal to them. Since Bajans are usually a fairly docile people, they can easily be conquered, however, we have a young generation that are ready to defend this country from the influx of persons whose only objective is to establish themselves even at the expense of native barbadians, it’s a modern day invasion.
I am waiting and watching carefully. What we are seeing is the beginning of potential stall tactics from the TnT officials in protection of their local carrier. Forget that name Caribbean Airlines.
It is still to early to say if this is just rhetoric but it is interesting to note so far. I am hoping that our leadership is paying attention to this rhetoric which can negatively impact Barbados’ economy if the rhetoric turns into action and inter-island travel is hampered.
I am also hoping that CAL’s landing rights into Barbados are also on the table if RedJet is “blocked” from entering TnT.
Freundel better get ahead of the rhetoric and act on this one and not “study it astutely!!” Hope he finally realise that Caricom is pure talk
Waiting and seeing
Shouldn’t REDjet know the procedure in this case flying into T&T?
If they messed up it would be a major PR gaffe. T&T Officials don’t need this issue to be hostile.
@BU.David et al…
Please note (again) the effect of REDjet (possibly) entering the marketplace.
CAL lowers their rates and spends a lot of money talking about it.
LIAT is silent.
LIAT is in shock
I ‘ve got an idea…why doesn’t redjet buy out Liat and redesign the model for Air travel in the Caribbean. It is obvious we Caribbean peoples are not capable of running an airline. Let us face facts, we should leave certain things to those who are good at what they do best.
@ 40acres and a mule:
I agree with your choice of aircraft (Q400’s or ATR) along with the MD’s, EXCEPT…..
this is not the model for an LCC. In order to control the costs, it is best to (1) own the plane, not lease, (2) stick to a tried and true platform- in this case, a used instead of new; there are a number of experienced mechanics, pilots, etc on the type that would only need refresher vs new training. (3) same for parts and equipment
There is of course always those that say it MUST be shiny and new, but there are 1950’s era DC-3’s safely flying every day – it all comes down to good maintenance and dedication. And lets be honest – once settled into your seat, can you really tell that aircraft was built in 1989 versus 1999?
@islandgal246:
Better to let LIAT collapse on its own, no one wants to buy out LIAT and the Antiguan corruption and problems (look at what is happening with Caribbean Airlines and Air Jamaica)
But I doubt LIAT will fold. Either they will get their 5 or so Q400’s around year end, or they will dramatically contract to a Northern Caribbean carrier only.
@BGI: “But I doubt LIAT will fold. Either they will get their 5 or so Q400′s around year end, or they will dramatically contract to a Northern Caribbean carrier only.
Please correct me if I am wrong, but does not the GoB own at least a part of LIAT?
Yes
I was thinking of going into Grenada a few weeks ago and was quoted a fare of over bds$900.00, additional i was expected to overnight in T&T on both trips, at my own expense; so much for a Caribbean Airline. Glad to see an airline that is willing to bring the people of the region together.
@BGI: “Yes
Well answered.
So, then, if an airline wishes to compete against the incumbents, and at least one of the incumbents is owned by the regulatory authorities…
…might one not envision that Business would be made difficult?
A follow up question… Does this further the Consumer’s Interests?
The problem with LIAT is that too many of the region’s countries contribute nothing to the running of the airline, yet wants to call shots on what the participating countries are doing. Again so much for Caricom, too much grabbing but no giving by caribbean countries, incedentally Barbados is behaving like the obedient child but getting the messy end of the stick.
@Chris:
Ah ha! By jove, I think he’s got it!
It would not be illegal for GoB to have an interest in an airline that is in direct competition with another airline that it directly regulates, but it does create an environment of distrust, especially if certain “actions” by the regulators can be seen as being biased or tainted in any way. But we are WAY too civilized for such unethical behaviour, ent? In this case, at the moment, there may be a certain synergy between them, as LIAT still is best suited to feed passengers to the hub at Barbados for onward connection – except that again that is not the M.O of an LCC. Most LCC’s don’t waste time with interline agreements, etc. They just do what they are put there to do – move passengers at the best price, and make a dollar while doing it.
We’ll see
@BGI: “It would not be illegal for GoB to have an interest in an airline that is in direct competition with another airline that it directly regulates, but it does create an environment of distrust, especially if certain “actions” by the regulators can be seen as being biased or tainted in any way.
You don’t say.
(For those who don’t keep up on the acronyms, GoB means Government of Barbados, and LCC means “Low Cost Carriers”.)
REDjet launched in Guyana but not the same furor like Trinidad was heard.
Humm maybe it because they seem that it benefits their people david.
@David. Yes, AA has the largest fleet of the MD series aircraft, however, a lot of airlines including AA are retiring these aircraft because they are expensive to operate given their age and Boeing also stop producing these planes since 1999. US dept of transportation reports that it cost an average of US $ 3,500 per hour to operate the MD aircrafts. REdjet will have to fly on full capacity to even break even, given that there is no economic of scale operating just two airplanes. Unless, they are hoping to make their money on carrying a significant amount of freight in the cargo space.
The core model of operating a viable budget airlines, apart from the no-frills offerings, its all about high-density routes and turn around times. The caribbean market is different from other regional market that operate LCC. and therferoe I donot see the density on these routes to justify these prices going forward in the long and also not the most efficient use of these planes.
Airline business is an expensive start up operation business and the profit margin is low. The quickest way to become a millionaire if you are a billionaire is to invest into the airline industry according to the indusrty joke. Also,I hope they owned these airlines rather than lease them and adding a Bahams route and a Cuba route make sense becaue these are longer haulage. I wish them well.
@40acres and a mule: “I wish them well.
No you don’t.
Please, at the very least, speak the truth when you speak.
well most of the rate past july start @ 39.99. So full flight bgi-pos near 6K us. Then options + lugguage maybe another 6K ?. So pos flight can break even. maybe guyana too. jamaica will be alot harder since the flight is alot longer in comparison. I do hope they last so the airfare rates stay down across the board.
Wishing this airline much success. Hope they do not short change themselves and sooner rather than later, which I hope not, they go out of business.
They don’t have to be greedy but need to be smart so that their fares are competitive and cover all the costs.
Good luck REDJet I wish you safe flying for many years to come. Take a bow and show them how.
@CH. What are you talking about I donot wish them well. I have made a critical assessment of Redjet model that does not mean I wish them bad or what I say is gospel. I am not privy to all their operational plan and therefore what I am talking about is the generalities of operating a LCC. All I am saying is that I hope I am wrong.
Hey, I’m wishing them well too, but at the moment, my resume remains here in my hand, regardless of how attractive or suitable the post may be.
Been there, done that, cashed the paycheck.
Now that T&T has made it official about permissions needed to land in T&T the public needs an explanation from REDjet.
@David
Too right! This whole process throws serious questions about the competence of the operators of REDjet. This is International Aviation 1:1. The operation of this airline will only help to destroy LIAT, and as I mentioned before, be careful what you wish for. In our Barbados-centric way, we forget that many people travel between other islands on LIAT, and not just the “hub” routes from Barbados and Antigua. Even businessmen from Barbados will take in several islands on one trip without returning to Barbados. LIAT is therefore essential for the continued contact, trade and business within the Caribbean. Dilute their revenue from the “hub” routes, and LIAT could be in serious trouble. Then what?
Get it Right,
I think many would agree with you, but LIAT at any cost?
Its long overdue that a proper business plan is produced and adhered to. I think if this was done they would be a step closer to commercial survival. New aircraft financed by a pan-Caribbean bond with shareholder Government guaranteeing them at a reasonable interest rate.
@Get It Right
The impression I get from reading your posting is that Barbados
will destroy LIAT if RedJet is allowed to operate.
You stated inter alia . Quote ”LIAT is therefore essential for the continued contact, trade and business within the Caribbean. Dilute their revenue from the “hub” routes, and LIAT could be in serious trouble. Then what? ‘ End quote .
Why don’t you tell that to some of the other islands of the Caribbean which are serviced by the same LIAT, and contribute very little to its upkeep. As far as I know, Barbados Antigua and St. Vincent have been providing life-support for this comatose airline for the longest while. Only recently Prime Minister Gonsalves was on his knees begging the other Caribbean countries to increase their contributions to the existence of the airline. Are we the jackasses of the Caribbean?
Come on Redjet you making a dumb jackass like jack Warner look semi literate no way that corrupt clown who barely avoids prison every year should steal a march on you.
Here is a plan – just begin a process (in cooperation with RedJet) of ‘temporarily’ suspending services from the territories where their governments have been openly hostile to LIAT, citing unsustainable operating losses, unless said governments are open to providing financial support for the airline, through capital investment or a significant reduction in fees.
The sky is the limit! For oil prices that is, as the IEA declares, “the age of cheap energy is over.” To what extent can we expect continued access to cheap air fares in a world of increasingly expensive energy?
LUXEMBOURG, April 22 (UPI) — The global energy sector will have to kick into high gear to meet soaring demand, the IEA said as it warned of the end of cheap energy.
The International Energy Agency warned that it won’t be easy to reverse the rise in energy prices because it’s getting harder to access and exploit conventional resources.
“The age of cheap energy is over,” said IEA Executive Director Nobuo Tanaka in a statement from Luxembourg.
Read more: http://www.upi.com/Science_News/Resource-Wars/2011/04/22/Cheap-energy-no-more-IEA-says/UPI-35301303479494/#ixzz1KGodRi4d
@ Green Monkey
“The age of cheap energy is over,”
*******************************
LOL…
That research hypothesis has long been established on BU…. with the notable minority position of the venerable Micro Mock Engineer, who is convinced that a new revolutionary energy source is imminent…..
The IEA needs to use BU as a research resource…
Hint
International Headline coming from major sources in the near future…
“Life on granny earth as we knew it is over.”
…already researched and established on BU…. LOL!!
Ok let us try to get to the bottom of this tourism business. Is the sector growing or not?
When LIAT was based in Barbados, the airline was maybe not very profitable but it’s operational costs were way less than when the base was moved to Antigua, maybe this is something the investors need to examine and possibly return it to Barbados.
@david
many would like to know since they not seeing it in the accounts or bookings.
David,
I think Colin Jordan has raised some very fundamental issues which have to be addressed. Lets look at the actual long stay visitor arrivals (CTO):
2004 – 551,502
2005 – 547,534
2006 – 562,558
2007 – 572,937
2008 – 567,667
2009 – 518,564
2010 – 532,180
So when we talk figures we should bear in mind that 2010 was the second worst performing year over the last seven years.
Added to this we KNOW spending is down and there has been a marked trend from visitors switching from traditional hotels to villas. This is one of the questions we should be asking, WHY?
Our registered hotels barely achieve an annual average occupancy of 50% and this in spite of all the airline/marketing subsidies and increased airlift out of several markets.
Of course, we have also lost airlift and I am still awaiting a reason why we cannot fill one little B737, once a week out of the world’s busiest airport.
Perhaps the new BTA board have the answers!
@Adrian
To be quite honest we are becoming somewhat confused.
Is the tourism industry on the bounce or not?
The Governor in the first quarter review indicated that tourism arrivals in the winter were on the up and up.
Here is the GRAPH which the Central Bank inserted in their review.
What are we missing?
David,
No wonder many people are confused.
Its not about absolute numbers, but more about average stay and spend.
3 months income does not pay 12 months bills and there appears to be nothing in the market place other than heavily discounted programmes while the tourism industry is having to absorb increased operating costs.
The following comment is posted on the Advocate website (not sure for how long) under this article. Not sure how many Barbadians know about the closing of office out West. Seems a strange decision after the launch of the new nonstop Dallas service which is intended to grow the market in the West.
Perhaps Adrian can explain it!
David,
I am afraid that I cannot explain it at all, as it seems totally illogical to me. I notice the LAX contact details have been taken off the BTA website and does this also mean that the Consular office has closed?
The Dallas gateway offers such tremendous potential and the connections from the Pacific coast through DFW have been greatly improved.
California alone has a population of nearly 37 million which compares with the 19 million of New York state, but more importantly the demographics fit our product.
And unless I missed it, I saw nothing announced in the media by the BTA of the closure.
I think the BTA CEO was based on San Diego prior to taking the job, so it is not as if ‘we’ do not understand the market.
However, again I have to repeat that if we are unable to fill one tiny B737 out of the world’s busiest airport, one a week, something is fundamentally wrong.
http://www.gisbarbados.gov.bb/index.php?categoryid=13&p2_articleid=5002