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Airline Integration:
Biting the Bullet |
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Norman Girvan (1)
The Greater Caribbean This Week |
 At
a meeting at the ACS headquarters in Port of Spain on April 9-11, agreement was
reached on the draft text of an ACS air transport agreement. When implemented,
the agreement will substantially liberalise air services among most of the 28
countries in the ACS Greater Caribbean region.
In
the same week a report out of Washington D.C. drew attention to the fact that
several U.S. carriers have been increasing their services to Caribbean
destinations in response to sagging domestic air travel. Notably, U.S. Airways
has introduced services to the Bahamas, the Dominican Republic and Puerto Rico
and is building an intra-Caribbean operation, the Go-Caribbean network, which
includes marketing arrangements with Dutch Antilles Winair and with Caribbean
Star.
As
the regional airlines of the English speaking Caribbean desperately seek
government financing to keep operating, they face the prospects of heightened
competition in a declining market still affected by the fall-out from war and
terrorism.
Yet
new opportunities are being opened up by traffic liberalisation, such as the
proposed ACS air agreement, and by the growing interest in intra-Caribbean
trade, investment and tourism.
If
the current liquidity problems of Air Jamaica, BWIA and LIAT lead to another
round of government bailouts; with restructuring so that the airlines can
compete again with each other and with the restructured North American carriers;
a significant opportunity will have been missed. If history is any guide, the
airlines will continue to lose money at taxpayer's expense.
Yet
is hardly likely that governments will allow the airlines to go out of business,
leaving the region's airlift exposed to the vagaries of the commercial
objectives of the North American airlines.
Surely it is time to bite the proverbial bullet: to condition government support
on a co-operative, integrated approach among the region's airlines aimed at
achieving sustainable profitability while providing adequate services.
Experts argue that a cooperative system would have the size to be competitive on
an international scale and enjoy economies of scale, while eliminating the
costly competition and duplication that currently exist.
Competition will continue to be provided by the international carriers both
extra regionally and intra regionally.
Rather than immediate integration or merger, a phased approach might be adopted.
Each
airline might retain its operational identity under an umbrella regional
organisation responsible for planning, scheduling, purchasing and other aspects
of functional cooperation.
Eliminating the three-way competition for intra-regional traffic, they say,
would give the co-operative airline much greater scheduling flexibility.
Aircraft upgrades would become feasible, as increased traffic volumes would
allow transition from the existing turboprops to 50 - 75 seat regional jets
offering faster, more direct and more frequent service on intra regional routes
with convenient on-line connections to more frequent longer haul services via
regional hubs.
Miami's position as a hub for intra-regional travel would be minimized. This
would facilitate business and commerce and greatly improve tourism access to the
smaller island destinations from both North America and Europe. Overall lower
costs driven by increased aircraft utilization and fleet commonality would
result in lower fares, further stimulating travel volumes. A common fleet would
also sustain a viable major maintenance and overhaul base for the airline.
A
Caricom airline alliance could also seek expanded alliances with other national
airlines in the Greater Caribbean region, contributing to the goal of
establishing the Caribbean as a zone of sustainable tourism and of uniting the
Caribbean by air and sea.
1) Professor Norman
Girvan is Secretary General of the Association of Caribbean States. The views
expressed are not necessarily the official views of the ACS.
Revista INTER-FORUM is affiliated with
(ICCAP) Any reproduction in part or whole is strictly forbidden without the authors written authorization
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April
22, 2003
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