According to a statement issued recently, the 200 plus airline members of the International Air Transport Association (IATA) are poised to deliver a higher than forecast record profit in 2015 and should see a further earnings increase in 2016, literally ‘fuelled’ by oil prices near seven-year lows. Profits for last year are estimated at around US$33 billion representing a near doubling of earnings after carriers combined to deliver a net profit of US$17.3 billion in 2014.
So good news for the consumer or traveller you might think. We know that many airlines buy aviation spirit forward (hedging) at fixed prices, so there is bound to be some sort of delay in lowering fares, but why are some carrier’s months later after the dramatic fall in oil prices still imposing a fuel surcharge, including our own regional airline, LIAT?
The question that has to be asked is, what was the price of Jet A1 fuel per gallon in January 2015 and what is it now?
When you Google ‘Liat fuel surcharges’ this is what appears on their website – ‘It will be adjusted on a bimonthly basis according to market prices’. The current fuel surcharge of a Barbados/St. Lucia flight is US$6.25 per passenger each way, so with an 80 per cent loading on one of LIAT’s new ATR72-600 aircraft that’s a total roundtrip surcharge levy of US$680. The manufacturer describes this particular model as ‘by far the most fuel efficient’ for regional operation.
The flight distance from Grantley Adams to F.L. Charles airport is 104.21 nautical miles (nm). On the ATR website they list an example of a 250 nm point-to-point allowing a ten minute taxiing time, stating that the plane would use 1661 lbs or 753 kg of fuel. One gallon of fuel weighs around 6.7 lbs, so on a 104 nm flight would use 692 lbs or 103.33 gallons of Jet A1.
What does LIAT currently pay per gallon for fuel?
I suspect that there are many citizens who cannot understand why our Government is not passing on equitable savings in oil, petrol and diesel costs which of course would have the effect of reducing energy, food and distribution costs. Perhaps the mountain of national debt dictates that any reduction would lead to a substantial loss in duty and VAT revenue collection.
But the Barbadian taxpayer is the single largest shareholder of LIAT and our main foreign exchange earner is tourism. While the national marketing agency (BTMI) spends millions annually to try and recapture the lost intra-Caribbean visitor numbers, why is LIAT still allowed to gouge potential long stay arrivals by persisting to impose what can only be described as unjustified fuel surcharges. It is not rocket science to understand that lower airfares drive more volume.
Carriers like JetBlue have it down to a tea, with lead-in prices on the new Fort Lauderdale/Barbados route starting in April, as an example, for under US$300 return including all taxes.
You only have to follow social media sites to quickly understand that many regular visitors anxiously watch for seat sale offers from most of the major carriers that service Barbados to be announced, prior to making a travel and accommodation commitment.
As a passionate advocate of growing intra-Caribbean travel, I sincerely believe high airfares and ludicrous Government over-taxation have severely curtailed the demand for travelling within the region. But it is seldom too late to redress the situation and any administration has to finally accept that you can only extract taxes in just so many ways.
The blogmaster invites you to join the discussion.