A reduction in air services to the region creates the potential for a new economic crisis
By David Jessop
Around the world the biggest airlines are reducing services, increasing fares, levying surcharges and abandoning destinations as the cost of fuel continues to rise. For a geographically fragmented and tourism dependent region such as the Caribbean, the potential for a new economic crisis is large.
Over the last twelve months the cost of aviation fuel has risen by ninety per cent and is still increasing. As a consequence the airlines on which the region depends for access to the wider world and to feed visitors into the region’s all important tourism industry are in the process of making cuts that will see by the year end a dramatic fall in services to and through the region.
Unlike many tourist destinations in Europe or North America where the majority of visitors arrive by road and by rail, the Caribbean depends on those who come by air to provide ninety-five per cent of the GDP that is earned by the Caribbean tourism sector (estimated at US$40 billion in 2008 by the World Travel and Tourism Council). This is in contrast to those who come by sea who leave almost all of what they spend with the cruise ships on which they travel rather than the destinations they visit.
Put another way, this means that most Caribbean nations depend on there being a high frequency of well-priced air lift to sustain the economic viability of their economies.
From media reports it is already clear that major US carriers will significantly reduce both their direct flights into the region from the United States and ‘restructure’ feeder services through points such as San Juan.
According to industry sources those destinations likely to be hardest hit as the year proceeds will be those served by American such as the Dominican Republic, the Dutch Antilles, and a number of Eastern Caribbean nations served by American Eagle’s San Juan hub, as this is replaced by less frequent direct services from the US mainland. They cite as reasons for the choice of these and possibly other regional points as increased fuel costs coupled with the high levels of operating cost and taxes levied in the countries concerned.
So severe could this process be that one senior industry executive believes that much of the last twenty years spent by one airline in building a Caribbean route network will have been wasted.
This in itself is bad news, but what is more alarming is that a consequence of cutting routes and reducing the supply of seats is that the cost of air fares on remaining services including those provided by low-cost carriers is expected to rise, not least to cover operating costs and to retain the overall viability of the service. If this is the case it will be happening just at the moment when the region has still not addressed the consequences of greater global competition from other destinations, the role of regional carriers and the high costs of inter-regional travel.
In 2007 visitor arrivals by air into the Caribbean at 22.55 million showed an increase of 1.49 per cent over 2006 while Cruise visitors at 19.5 million were two per cent higher than in 2006. In 2007 the US market grew by just under one per cent, Canada by 12.5 per cent; Europe by 2.5 per cent while all other arrivals, a figure which includes inter-regional travel, declined by 4 per cent. Given the fact that the Caribbean is still acknowledged to be one of the world’s premier tourism destinations these figures contrast starkly with average global tourism growth in 2007 of seven per cent.
