Getting Airlift Right

There is no need to remind anyone that the world supply of natural gas is increasing and according to BP's Chief Economist Christof Rühl, the global demand for oil/gas may have adjusted to a lower level from the previous peak. In economics, an increase in supply plus a decrease in demand, equals downward pressure on market prices. This is not good news for gas producers like Trinidad and Tobago. Tourism however, offers a credible path to economic diversification and employment growth.  Tourism was also featured prominently in the manifesto of the present administration. 

A necessary but not sufficient element in any island state’s tourist strategy is airlift.  If we do not have the right number of seats, at the right price, from the right source markets, landing at the right times, we will have a problem attracting visitors from our identified target markets.  Airlift is however, a very complicated element in an island state’s tourism development strategy.  One popular myth is that the aviation industry is at the mercy of normal market forces. It is not. In my opinion, there is no airline in the “West” that does not enjoy some measure of state support or protection. Governments influence airline behaviour through a dizzying array of legislation, taxes and subsidies. Whether it is a law in the USA mandating that an airline be 75% owned and controlled by US citizens (ask Virgin America) to operate, to landing rights, landing fees, traffic rights, restricted competition on routes, preferential slots, preferential terminals, seat guarantees, bankruptcy protection, tax concessions, etc. 

Much to its disappointment, REDjet has now realized how complicated this picture can be.  But in my opinion, this is bigger than REDjet.  Destination Trinidad and Tobago is being deprived of an opportunity to increase the number of available seats landing in Trinidad and Tobago.  So the real question would be whether at the level of the line Ministry, any robust study was done to assess the impact of REDjet’s arrival on Caribbean Airlines’ finances, as well as the impact on the local economy of having more airline seats for potential visitors.

It seems somewhat paradoxical that on one hand the state is paying millions of dollars for extra airlift (into Tobago in particular) while on the other hand, carriers are being driven away.  Remember that even though Tobago is paying for airlift, there are estimates of the destination losing between 30% and 50% of its seats over the past 5 years or so.  This summer, Tobago will lose LIAT.  It has also seen reduced services from British Airways. Martin Air, Condor, and Monarch among others.  Did we consider allowing REDjet into Tobago only, if we thought CAL needed more time to prepare?

We need to carefully encourage private sector participation to make tourism a success in Trinidad and Tobago.  Some say that REDjet’s problem is also mirrored our hotel sector.  Over the past couple years, some argue that there is now a surplus of hotel rooms given average daily demand.  So we are not talking about carnival, just on the average day.  Privately run hotels here in the Port of Spain area, say that with occupancy being low, aggressive price competition from the state-run Hyatt and the Hilton during periods of low demand, is making it even harder to survive.

Returning to REDjet, they recently announced that it will no longer seek to operate flights between Jamaica and Trinidad and Tobago, and it has also announced a postponement of the service between Barbados and Jamaica for another two months.  I suspect that the Jamaica – Trinidad service was going to be their most profitable and one can only speculate as to their reason for surrendering it.  At the moment, I would imagine that they are now very busy reviewing their business plan in light of these changes.

There is also an online petition ostensibly organized by supporters of the new carrier atwww.petitiononline.com/redjet1.  Nice idea although I doubt it would make any difference.  Hopefully in a couple months REDjet will begin servicing Trinidad and Tobago; encouraging more of our regional neighbours to visit our shores as well as making easier for visitors from beyond the Caribbean to get to us via Barbados.  Our tourism industry needs all the help it can get right now. FBAR Reporting Singapore

My name is Derren Joseph and I love my country. As always, I end by saying that despite our challenges, we are so blessed to live in this beautiful land. Let us continue to have the audacity of hope in the future of our beloved country. 

Derren is a travel and tourism consultant. The views and opinions expressed here are solely the views of the writer and do not necessarily reflect the views of any company or institution affiliated with the writer.

Comments

Popular posts from this blog

Investing in the USA

Dormant Foreign Corporations and Form 5471 - Rev. Proc. 92-70, 1992-2 C.B. 435

10 US Tax Rules For Foreign Entertainers And Athletes

Trusts vs Foundations

Economic Substance Requirements in the British Virgin Islands (BVI)