Redjet goes under; what next?
As anticipated for some time now, the latest private sector innovation in air transportation in the Eastern Caribbean (also serving Guyana) has come to an end, leaving LIAT, the publicly owned airline of the area as once again the only substantial inter-island player in the region. For many years, particularly in the 1990s, a sentiment developed that the problems of LIAT lay substantially in its publicly-owned character, and that a private sector approach might be the preferable one in an area of growing tourism.
In the period since then, however, we have seen a number of private sector efforts – recall Eastern Caribbean Express established by Eastern Caribbean interests substantially from Barbados, then Caribbean Star and Caribbean Sun, owned by the now infamous Allen Stanford whose apparently deep pockets seemed to provide the best chance for success in a generation. And then came, most recently, Redjet, again owned by regional (in particular Barbados) interests, which promised to do, once and for all, what other sub-regional efforts – public or private – could not achieve. But its life seems to have been the shortest of all, with its owners crying foul about insufficient regional governmental cooperation.
The company has complained that it had failed in what, to it, would have been a strategically crucial effort, that is, to secure “the full aero-political support of the Barbados government” in attaining the status of a “designated national carrier.” Many might query why Redjet’s owners should have thought that that government, already one of a reduced (to three) regional owners of LIAT, should have wanted to replace its commitment to that airline in support of what clearly would have been nothing more than a kind of nationalist versus regionalist sentiment.
And surely it must have occurred to the Government of Barbados (and, most likely the Government of Guyana which had also been approached), that if the issue were posed in that way, experience had already shown that a situation of two airlines operating simultaneously, and both wanting government support in one way or another, could not prevail for too long.
Clearly, Redjet’s owners’ major objective, as indicated to many observers by its low-fare competition, was to run LIAT out of business in short order, to quickly convince the governments of the sub-region and Guyana that there is really only space for one airline serving the Eastern Caribbean sub-region in terms of traffic between the islands. From their private sector perspective, LIAT had already demonstrated its inability to do this without substantial support, and only a private sector approach could do the trick.
But both governments, and long-standing observers, have recognized that the character of the region has required what, in respect of LIAT, has been the case: that, to quote a 2009 Caricom Secretariat Report, while the airline “operates commercially,” it does so with a significant “social conscience” that, inevitably, leads to the operation of marginal and loss-making routes. And the question would be, in the case of a wholly private sector airline, whether it would not be just a matter of time before governments were being asked to subsidize these “marginal routes,” since no other external airline would be prepared to do so.
The disappearance of Redjet, however, can hardly be consoling to either governments or LIAT. LIAT, carrying the name “the Eastern Caribbean airline,” is already reduced to having only three shareholders – Barbados, St Vincent and the Grenadines and Antigua and Barbuda – all countries already strained in operating their national finances. One of the major beneficiaries of LIAT, St Lucia, pulled away from support for the airline, and must be considered by the three owners as something of a ‘free rider,’ even though its tourism industry provides the airline with a not insignificant market. The government of Dr Kenny Anthony, which originally declined to participate in the current LIAT arrangements, would, we suspect, be hardly inclined in a situation in which he, as Minister of Finance, has recently described the country’s economic situation as tough, to be enticed even by his OECS colleagues, to commit once again to LIAT.
It appeared, while Prime Minister Patrick Manning was in office, that what was described as his government’s privatization of BWIA and its conversion into Caribbean Airlines (CAL), and then its virtual absorption of Air Jamaica, was proceeding to another effort of rationalization of air transport arrangements in the region, and particularly rationalization of transport from the Caricom arena to the wider world. In that context, it seemed, there would be a role for LIAT, though some might ask whether it would, in that capacity, benefit from subsidized fuel arrangements from Trinidad.
It does not, however, seem that the issue of regional air transport rationalization is a front-burner issue for the current government of Trinidad & Tobago, and in any case, recent revelations in the Trinidad press do not suggest that the management of the airline is operating on the kinds of efficiency basis that Manning had promised that privatization could achieve.
So the issue now is, with governments – indeed only three governments – of the Eastern Caribbean left alone to handle LIAT’s predicament, and with the OECS governments unable to take a collective view of that predicament, what is the next step that can be taken? Can Trinidad be induced to participate in the enterprise? Or with the recent furore over the running of CAL is this almost an impossibility in terms of Trinidad public opinion?
We note that three years ago, in 2009, the Caricom Secretariat released what was described as a Concept Paper, entitled ‘Strategic Plan for Air Transport Services in Caricom.’ And two years ago, the long-serving Chairperson of LIAT and sometime Director of the Caribbean Tourism Organisation, Jean Holder, has presented an extended review of the Caribbean air transport situation in ‘Don’t Burn Our Bridges: The Case for Owning Airlines.’
We are not clear whether Caricom governments have reviewed the Secretariat’s Concept Paper. But with the appearance of Holder’s text, has the time not come to have a public-private review of the state of things in air transport in the region? In recent times there has seemed to be an element of rethinking in governmental circles, and particularly in Jamaica whose sale of Air Jamaica, seen, for many years, almost as a symbol of the country’s sovereignty, indicated an approach of political realism in today’s world circumstances.
Should our universities, in cooperation with willing participants from the private sector not take up the challenge of an objective review of the current situation? Is this not a sufficiently important aspect of the creation of a single market and economy?