Ian Nar­ine

Do you in­vest for the sake of it? The an­swer should be no. In­vest­ing is a means to an op­por­tu­ni­ty to have greater pur­chas­ing pow­er in the fu­ture than you have to­day. This type of good or ser­vice that pro­vides a path to the ul­ti­mate good or ser­vice is re­ferred to as an in­ter­me­di­ate prod­uct.

An in­ter­me­di­ate prod­uct is eas­i­ly com­modi­tised as con­sumers of­ten seek the low­est cost to­wards at­tain­ing a par­tic­u­lar ob­jec­tive. Aside from cost oth­er is­sues that res­onate are ef­fi­cien­cy, re­li­a­bil­i­ty and con­sis­ten­cy to name a few. There is room for the ad­di­tion of frills and oth­er es­o­teric fea­tures, but this must be an­chored to the un­der­stand­ing of the core in­ter­me­di­ate na­ture of the prod­uct and frills should be flex­i­ble enough to on­ly be made avail­able as and when need­ed as to do oth­er­wise will un­nec­es­sar­i­ly add to the cost of the prod­uct with­out any at­ten­dant ben­e­fit for the ma­jor­i­ty of users.

To the pub­lic air trav­el is al­so an in­ter­me­di­ate ser­vice and there­fore quite sim­i­lar in prin­ci­ple to in­vest­ment man­age­ment in that peo­ple don't fly sim­ply for the sake of fly­ing. They fly, whether for busi­ness or for plea­sure to get from point A to point B. It is the des­ti­na­tion that is the ul­ti­mate good that the trav­el­er seeks.

Much of what hap­pens in-be­tween is a nec­es­sary in­con­ve­nience. To il­lus­trate the is­sue even fur­ther a cruise ship is not a means of trans­port since it is out­fit­ted with all the bells and whis­tles so that it is the event in it­self. By po­si­tion­ing the cruise ship as a float­ing re­sort the ship be­comes the va­ca­tion des­ti­na­tion as op­posed to an air­line which is the means of trans­port to the des­ti­na­tion.

The point to this dis­cus­sion so far is that it is im­por­tant to know and un­der­stand the in­dus­try in or­der to make and take de­ci­sions that are rel­e­vant. The fail­ures at Caribbean Air­lines and pri­or to that BWIA are well doc­u­ment­ed. We have ex­ac­er­bat­ed those fail­ures by tak­ing on the bur­den of an­oth­er fail­ure in Air Ja­maica. The term fail­ure is used to re­flect the con­sis­tent un­prof­itable fi­nan­cial per­for­mance of these en­ti­ties.

T&T has a na­tion­al air­line, one, which we are told, is al­so im­por­tant to the peo­ple of Ja­maica and be­yond that have flag car­ri­er sta­tus for Guyana. So my ques­tion is how much de­bate and dis­cus­sion ex­ists in T&T around the air­line in­dus­try? How much do we un­der­stand about what is need­ed and how it is to be ac­com­plished?

The ex­tent of our dis­cus­sions has been lim­it­ed to the bac­cha­nal of the is­sues sur­round­ing the Board and suc­ces­sive Chair­men. It ex­plains why we stand where we are cur­rent­ly and it al­so high­lights an­oth­er of our fail­ures as a na­tion.

Prof­itabil­i­ty fo­cus

Did the Gov­ern­ment of T&T list a com­pa­ny called BWIA on the T&T Stock Ex­change and in­vite the pub­lic to par­tic­i­pate in own­ing shares in that air­line? Should such ac­tion not mean that prof­itabil­i­ty and share­hold­er val­ue was now para­mount? Did the Gov­ern­ment of T&T man­date that BWIA must de­vel­op routes, such as Cos­ta Ri­ca, Wash­ing­ton and I be­lieve Cu­ba, even though such mea­sures would have re­sult­ed in an ero­sion of share­hold­er val­ue to pri­vate share­hold­ers?

Did the Gov­ern­ment of T&T then cre­ate un­cer­tain­ty in the minds of the trav­el­ling pub­lic as to the very ex­is­tence of BWIA, es­pe­cial­ly dur­ing peak trav­el months lead­ing to a re­duc­tion of book­ings ac­cen­tu­at­ing the lack of prof­itabil­i­ty?

When BWIA was shut down and Caribbean Air­lines formed lo­cal share­hold­ers were made to take the loss­es as­so­ci­at­ed with share own­er­ship. So my ques­tion is: how did the Gov­ern­ment of Ja­maica end up with 16 per cent of Caribbean Air­lines aris­ing from the merg­er (ac­qui­si­tion?) with the loss mak­ing and heav­i­ly-in­debt­ed Air Ja­maica?

Is it be­cause of the routes that Air Ja­maica owned which are con­sid­ered to be valu­able? My next ques­tion is since when routes be­came a panacea for prof­itabil­i­ty? Did BWIA not have a lu­cra­tive route to Heathrow Air­port but this was sold as part of re­struc­tur­ing to a prof­itable air­line?

Lack of vi­sion

When Caribbean Air­lines was formed did the Gov­ern­ment of the day pro­vide the peo­ple of T&T with a po­si­tion pa­per laid in the Par­lia­ment that de­tailed the ob­jec­tives of the new air­line and how it fits in­to an over­all na­tion­al strat­e­gy and fur­ther what that na­tion­al strat­e­gy was/is? The point is that such a doc­u­ment pro­vides an ac­count to the tax­pay­er and fur­ther out­lines a clear frame­work around which fu­ture strate­gic de­ci­sions are to be tak­en?

If there is a strate­gic out­line where is the de­bate around the Air Ja­maica / Caribbean Air­lines deal and the ob­jec­tives for such a deal in the con­text of the afore­men­tioned frame­work?

The an­swers to these ques­tions may al­ready be in the pub­lic do­main, I don't know.

How­ev­er, these ques­tions are posed here in the con­text of Caribbean Air­lines post­ing US$87 mil­lion in loss­es for 2012 and seek­ing fi­nanc­ing for US$234 mil­lion in debt as at April of this year. In ad­di­tion, there is the April 15 ar­ti­cle in the Ja­maica Glean­er that says: "The Ja­maica gov­ern­ment is threat­en­ing to with­draw the Air Ja­maica brand from the Trinidad-based Caribbean Air­lines (CAL) fol­low­ing wide­spread re­ports here that the car­ri­er would be re­duc­ing the num­ber of dai­ly flights to Ja­maica."

Are these flights on routes that CAL val­ued at US$50 mil­lion just two years ago? Recog­nise my point about routes not be­ing equal to prof­itabil­i­ty as it was al­so on these same routes and flight sched­ules that Air Ja­maica would have in­curred the loss­es that it did pri­or to is sale by the Gov­ern­ment of Ja­maica.

Is all of this tak­ing place at a time when the glob­al trav­el in­dus­try is re­bound­ing? It was just two weeks ago that the In­ter­na­tion­al Air Trans­port As­so­ci­a­tion (IA­TA) is fore­cast­ing glob­al air­line prof­itabil­i­ty to touch $12.7 bil­lion this year up from $7.6 bil­lion last year.

Be­fore one gets to at­tribut­ing val­ue to routes there must be a prop­er in­te­grat­ed and func­tion­ing busi­ness mod­el(s). First­ly an air­line com­pa­ny is in the as­set man­age­ment busi­ness as it re­lates to man­ag­ing its fleet of planes. This should fall un­der the purview of the com­pa­ny's chief ex­ec­u­tive of­fi­cer rather than be­ing the cause of pub­lic de­bate be­tween a chair­man and the line min­is­ter. The choice of lease ver­sus pur­chase and the type of air­craft that makes up the fleet re­quire spe­cif­ic knowl­edge of the in­dus­try and should be made by ex­pe­ri­enced per­son­nel.

If the air­line is run prop­er­ly and for prof­it then the in­ter­est of the Gov­ern­ment should be no more than a glo­ri­fied trav­el agent with the high­light be­ing on the lo­gis­tics man­age­ment el­e­ment of the busi­ness where the air­line fo­cus­es on its net­work of flights and time slots for take off and land­ing. This is where an air­line cre­ates val­ue for the des­ti­na­tion coun­tries in­volved.

Fi­nal­ly, there is the busi­ness of hos­pi­tal­i­ty and trans­port where the fo­cus is on de­liv­er­ing a valu­able ser­vice to pas­sen­gers at vary­ing price points and with suf­fi­cient flex­i­bil­i­ty so as to ac­com­mo­date dif­fer­ent needs in the most prof­itable man­ner.

The ex­ec­u­tive man­age­ment of an air­line has lit­tle room for er­ror as de­spite the fore­cast prof­itabil­i­ty, IA­TA es­ti­mates that, on av­er­age, an air­line will earn around US$4 per pas­sen­ger this year. For ref­er­ence that is equiv­a­lent to the cost of two pieces of chick­en and fires (with­out a drink).

In oth­er words, the choice of meal served on an air­plane could wipe out the po­ten­tial prof­it per pas­sen­ger per flight.

Yet we fid­dle around with these multi­bil­lion-dol­lar is­sues in such a high stakes game. Two weeks ago, the chief ex­ec­u­tive of­fi­cer of Kenya Air­ways point­ed out that run­ning an air­line as a busi­ness is the rea­son be­hind the com­pa­ny's suc­cess. This is a pri­vate­ly-owned air­line that has flag car­ri­er sta­tus for the state of Kenya hav­ing been pri­va­tised by the Gov­ern­ment of Kenya in 1996. I won­der what our vo­cal trade union move­ment will have to say about some­thing like that.

Then there is ex­pe­ri­ence of the Chilean Air Line, LAN which should, in my view, form the mod­el for CAL go­ing for­ward. It is a full ser­vice in­ter­na­tion­al air­line deal­ing in both pas­sen­ger and car­go as well as a low-cost, no-frills do­mes­tic pas­sen­ger car­ri­er.

Can you imag­ine a Chilean air­line that at the be­gin­ning of 2011 was worth more than British Air­ways and Amer­i­can Air­lines? An­oth­er suc­cess sto­ry is CO­PA Air­lines, but space does not per­mit. What is pre­vent­ing CAL from rank­ing along­side these three air­lines based in de­vel­op­ing coun­tries? We seem to like wreck­ing things and over­pay­ing for it as well.

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