Though the war in Iraq is said to be boosting air travel to The Bahamas, the Caribbean airline industry is facing increased competition from U.S. carriers servicing the region.
A report by Flight International said that U.S. majors are “dumping capacity into the Caribbean,” and discounting fares to a level that makes it difficult to compete.
But the underlying question is whether the struggling Caribbean industry can set aside internal squabbles and find a recipe for success in the face of that competition.
Managing director of Bahamasair Paul Major said that notwithstanding the financial plight of some international carriers, the Caribbean being so close destination is “a safer bet” than elsewhere.
“Because of the war, this summer, people are coming to the Caribbean. People believe the Caribbean is safe because it is close to the mainland U.S.A.,” said Pedro Fabregas, director of sales, marketing and planning for American Eagle’s operations in Florida and the Caribbean.
For some Caribbean carriers, the continued expansion by U.S. airlines to the region has proved a double-edged sword at a time when international traffic is down as much as 20 per cent, the report released April 8 said.
As to whether U.S. airlines are cutting into Bahamasair’s share, Mr. Major said the national airline is monitoring its competition daily and is not getting “one dime” more than should, though it is still not enough to cover costs.
“We are not more expensive,” he said. “The prices are seasonal, they fluctuate based on demands and we have to stay close to that otherwise our market share would shift.”
In the aftermath of Sept. 11, the Caribbean’s closeness to the U.S. mainland and its accessibility by air from most major U.S. gateways saw American tourists continue to flock there, albeit in fewer numbers, the April 8 report said.
In contrast, the Caribbean saw a steeper drop-off in European traffic during the same period, it said. By early February, the Caribbean Tourism Organisation, of which The Bahamas is a member, was predicting that tourism would this year recover to 2000 levels and resume real growth in 2004 ﾖ barring a war in Iraq.
It is unclear when a full recovery in passenger traffic to the Caribbean will occur, according to the report.
Observers note that even as they file bankruptcy, carriers such as American Eagle Airlines, Delta Air Lines and US Airways are expanding services to the Caribbean, directly competing with regional airlines.
U.S.-owned regional startup Caribbean Sun Airlines, a sister to Antigua-based Caribbean Star Airlines, is injecting competition into the market by initiating services from Puerto Rico to several Caribbean islands, the report said.
While U.S. carriers turn to the Caribbean for growth, the region’s own airlines, which for years have gone from one financial crisis to another, are downsizing, citing increased security, insurance and fuel costs, as well as the softening in the market.
Caribbean international carriers, including Air Jamaica, Bahamasair and BWIA West Indies Airways, as well as regional Liat, all seek government assistance.
On April 7, Bahamasair announced that it planned to lay off 60 or more employees, in a move to reduce cost and allow the airline to run more efficiently and effectively.
Mr. Major said that is still under discussions with the unions, and an announcement will be made later.
Then on April 9, Mr. Roberts told the House of Assembly that the cash-strapped airline lost $86 million over a three-year period. He attributed the overall losses to a number of factors including: staff and consultants’ salaries; high maintenance requirements because of the airline’s aging aircraft fleet; leases of foreign-owned and operated aircraft; hushkits to reduce jet engine noise; U.S. Internal Revenue Service and Immigration and Naturalisation Service interest and penalty costs; and increased insurance premiums after the Sept. 11 terrorist attacks.
The international report said no North American carrier has grown its Caribbean service more quickly in 2002 than US Airways.
In the past few months, the carrier, which has just emerged from Chapter 11 bankruptcy, has introduced services to The Bahamas, the Dominican Republic and Puerto Rico and boosted frequencies on several U.S.-Caribbean routes.
Delta, meanwhile, has initiated an assault on US Airways by increasing services to the Caribbean and Florida, the report said. To boost its winter schedule, the carrier expanded services from its Atlanta hub to Liberia, Costa Rica and St. Maarten, and resumed services from Atlanta to Providenciales in the Turks and Caicos, and from New York Kennedy to Aruba. It also added capacity on its Aruba-Atlanta and Nassau-Cincinnati routes. Continental Airlines and Northwest Airlines are also increasing flights to the Caribbean.
Keen to keep its edge in the Caribbean, American Eagle ﾖ whose Executive Airlines unit has hubs in Miami and San Juan ﾖ continues to expand, the report said. It will add services between San Juan and Nevis from May 15, to fill the void left by Nevis Express. The regional is also negotiating with Puerto Rico to open year-round services to Vieques by mid-year. Plans are in place to expand services to Nassau and add charters to Cuba. American Eagle hopes to initiate flights between San Juan and Georgetown, Guyana, via Port of Spain, Trinidad, as well as on a San Juan-Port of Spain-Surinam-Guyana routing.
On the possibility of a Caribbean airline merger, the report said that Caribbean airline executives are skeptical about this move.
Mr. Major said the idea is a sound one but the region has to find a way to consolidate resources and a way to leverage purchasing power, increase productivity and efficiency and other operating matters.
“We all have unique problems, different needs and all of those things represent challenges in trying to merge regional carriers.”
By Lindsay Thompson, The Nassau Guardian
