Earlier this month, the airline began advertising and selling tickets for its Barbados to St Maarten service, which was scheduled to begin on May 19 and last week the airline began selling tickets for the Barbados to Antigua service, which was scheduled to start on June 6.
The company planned eight new routes in 2012. It leased an additional aircraft, taking its fleet to three MD-80s, expanded its maintenance base in Barbados and launched a call centre.
One of the co-founders of REDjet, the Barbados-based, low-fare airline which suspended all of its flights on Friday because of financial problems, told the Business Guardian in January that the airline expected to turn an operational profit by the summer. And, as recently as January, in an interview with the Business Guardian, a confident-sounding Robbie Burns, REDjet's business development officer, was speaking about the airline's expansion plans in T&T. He said the company planned to open a corporate office on Maraval Road in Port-of-Spain and was also looking at new retail space in Arima and San Fernando.
Burns said the company was looking to employ 27 people in T&T by the end of this year, which would have been in addition to the 103 airline employees based in Barbados.
Earlier this month, the airline began advertising and selling tickets for its Barbados to St Maarten service, which was scheduled to begin on May 19 and last week the airline began selling tickets for the Barbados to Antigua service, which was scheduled to start on June 6. The company planned eight new routes in 2012.
It leased an additional aircraft, taking its fleet to three MD-80s, expanded its maintenance base in Barbados and launched a call centre. In fact, up to its last day in the air, the company still operated as though its future was bright and prosperous, which meant that the decision by the owners of REDjet, the region's first low-fare airline, to stop flying would have taken many in T&T, and around the Caribbean, by surprise. Describing the REDjet's aspiration to be the "Wal-mart of the skies," Burns disclosed that the airline had achieved 20 per cent market share penetration in the routes it flew since it started operations in May last year.
Speaking about the airline's shareholders, Burns said 51 per cent of REDjet was owned by two Barbadian businessmen-Kyffin Simpson and Ralph "Bizzy" Williams- through a company called Warrens Telecommunication. The company was launched with US$6 million in capital in January 2010. The Barbados press reported in November 2011 that Ralph "Bizzy" Williams, REDjet's largest Barbados shareholder, said that the airline's future was in jeopardy because it needed a cash injection of US$4 milllion to continue its operations. Williams had accused the Barbados Government of sabotaging the airline's progress through excessive delays and Bds$8 million, which was invested for operating expenses in the initial months of the business, had to be used elsewhere. In January, REDjet chairman and chief executive Ian Burns said: "Our shareholder was very clear that the (Barbados) Government did not keep their commitment to regularising the airline. So why should any REDjet investors invest in the country when the country wasn't holding its end of the bargain?
Last April, Captain Ian Brunton, former chief executive officer of T&T-owned Caribbean Airlines Ltd, warned of the importance of examining the viability and sustainability of the airline's "unusually low airfares." Brunton said such an inquiry should take into account "the high cost of maintenance and operation of the 'gas guzzling' ageing MD-82 aircraft, in a scenario of extremely high fuel and maintenance costs." "The commercial regulator has an obligation to ensure the protection of the travelling public from the vicissitudes and disruption that can be caused by reckless and unstable carriers. "This burden of proof should be on the applicant to show how it could viably exist in this very low-fare environment," Brunton said. Burns, in the January interview, also criticised bitterly the Caribbean Airlines fuel subsidy, describing it as "unsustainable" and saying that the US Department of Transportation was looking at the issue. He said on average about 45 per cent of the airline's expenditure went on fuel, with 55 per cent being used for everything else like salaries, maintenance and insurance.
Higher fuel prices negative
Higher jet fuel prices around the globe have had a negative impact on many airlines. Cathay Pacific Airways, Hong Kong's biggest airline, said last week that its profit fell 61 per cent last year, hurt by persistently high jet fuel prices and weakness in the world's major economies. An AP report stated that the airline warned of a challenging outlook for 2012 as it posted a profit of 5.5 billion Hong Kong dollars ($709 million) for 2011, down from 2010's record HKUS$14 billion. The 2010 profit which was boosted by some one-time gains. Earnings per share fell to HKUS$1.40 from HKUS$3.57. A "double whammy" of steep fuel prices and slumping cargo demand hit profits, Chairman Christopher Pratt said. He said 2012 is "looking even more challenging" than 2011 because of uncertainties including weakness in Europe and the US, an unsettled Middle East and a forecast slowdown in China. Cathay said high prices for jet fuel-its biggest expense at more than 40 per cent of total costs-had a "significant effect" on operating results.
Fuel costs rose by HKUS$12.5 billion, or 44 per cent, in 2011 from the year before, reflecting both higher jet fuel prices, which rose to an average of US$130 a barrel, and that it flew more routes. The airline managed to offset some of that with a HKUS$1.8 billion profit from fuel hedging contracts, which cover about 20 per cent of its fuel costs. "We worry about high oil prices," said Pratt. "Any increase in the cost of fuel eats into our profitability in a very, very direct way." Cathay executives said fuel prices have risen further but said that deliveries of new, more efficient aircraft over the next few years will help bring down the fuel bill. High fuel costs also hurt profitability at its air cargo division, as fuel surcharges weren't enough to cover the gap. The air cargo division, which accounts for 26 per cent of revenue, shipped 8.6 per cent less freight last year. Demand for air cargo shipments from Cathay's two biggest markets, Hong Kong and mainland China, started falling in April and remained weak for the rest of 2011, buffeted by the slumping global economy that cut consumer demand for electronics and other Asian manufactured goods.
The company said European demand was particularly weak. The division also faced increased competition from Shanghai-based airlines. Air cargo shipments through Hong Kong were also hit by the devastating earthquake and tsunami that struck Japan in March 2011. The tsunami destroyed a swath of factories producing auto and high-tech components in northern Japan, disrupting manufacturers that relied on shipping those parts through the city for use in China.Natural disasters and political instability cut travel demand to some of Cathay's major destinations. Demand for travel to Japan was "heavily affected" by the tsunami and subsequent nuclear crisis, although it recovered by October. Flooding in Thailand and unrest in the Middle East also hurt demand for travel. Cathay and its subsidiary Dragonair carried 27.6 million passengers last year, 2.9 per cent more than in 2010, but the amount of seats filled fell by 3 per cent as passenger growth failed to keep pace with added capacity.