The CEO of SkyBahamas says government subsidies to Bahamasair have “distorted” the aviation market and made it impossible to compete.
Captain Randy Butler is calling for the privatization of the country’s national airline, or a strategic partnership with a foreign carrier so it can function independently. Low airfare is forcing other airlines, such as SkyBahamas, to reduce their prices to the point where it has become unprofitable.
Butler indicated that SkyBahamas could be forced to end its Florida routes.
“It is becoming impossible to compete against Bahamasair,” Butler said.
“There is no positive movement that I can see to do anything about it. What the government doesn’t understand is if the fees keep going up and they keep subsidizing, it is distorting the market.”
Noting that SkyBahamas would also consider a strategic partnership, the top executive said something must be done to protect the airline and keep more than 120 Bahamians employed.
“I believe Bahamasair has a role to play,” the CEO said. “The way to do that is to decide it gets a strategic partner so it can equip itself with the right planes. That might mean a foreign strategic partner. I think that’s a good idea. Let Bahamasair form a strategic alliance, and let it expand to Europe and other places.”
Michael Halkitis, the state minister of finance, has made his intentions known that the government must tighten the taps on subsidies to public corporations such as the Bahamas Electricity Corporation, the Water and Sewerage Corporation and Bahamasair. The government pays out more than $20 million annually to Bahamasair each year.
“It is time to get away from that,” Butler told Guardian Business. “What is the purpose, otherwise you price it out of the market and make it impossible to live. Perhaps the government should privatize it completely. That’s what is happening in the region. If you talk about building the economy, the government doesn’t have the money to do otherwise. It will benefit Bahamians in the end.”
In the past, the Ministry of Tourism has continued to inject money into Bahamasair with the belief it will drive more tourism to the islands.
Earlier this year, the ministry announced a series of new direct flights from the U.S. to Grand Bahama, taking over service from Vision Airlines. The flights, however, involve the participation of a sub-service operator. Bahamasair is being gradually equipped so it can take over these routes fully in the future.
In February, Director General at the Ministry of Tourism David Johnson noted that the program would cut the airfare by 50 percent and the flight time by 70 percent from these U.S. cities.
“The government is leading the initiative through the Ministry of Tourism. They are investing marketing dollars to make it happen and partners extend to the airport and all hotels in Grand Bahama,” Johnson said.
Butler has questioned the use of sub-service operations, insisting Bahamasair could be taking on full-time partners that would ensure the long-term strength of the airline.
By Jeffery Todd
Guardian Business Editor
