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Airbridge a failed business model

Wednesday, January 11, 2017

There was nothing new or surprising about what chairman Shameer Mohammed and other Caribbean Airlines (CAL) officials revealed about the many operational and economic problems on the airbridge. It is an often repeated litany of woes—poor on-time performances, frequent breakdowns and financial losses.

On many levels, the business of operating flights between the two islands has been, for the most part, a losing proposition. The list of airlines that have tried and failed to provide an efficient and financially viable service on the route goes back several decades, including the long forgotten T&T Air Services (TTAS) and Air Caribbean, which both went out of business.

Tobago Express, the wholly owned subsidiary of CAL that now services the route, could have suffered the same fate had it not been for the fact that it enjoys the cushion of heavily subsidised fares and ongoing state support.

There is also the fact that an air link between Trinidad and Tobago is vital and that there are always significant social, economic and other costs whenever it is disrupted, which happens very often.

But the facts laid bare before the JSC this week are the same facts that come to the fore every time the operations of CAL and the airbridge are in the spotlight and the issues raised by Mohammed are similar to concerns raised by many other chairmen and CEOs of the airline and before that, BWIA.

It is a failed business model that seldom manages to break even, far less achieve a profit. Occasional, very substantial, injections of capital from the Treasury are what keeps that service airborne.

Information coming out of Monday’s JSC suggests that one of the biggest challenges facing Tobago Express, the fare subsidies, may soon be reviewed.

In any given year, millions of dollars of increasingly scarce taxpayers’ funds go into subsidising airfares between the two islands. It is estimated that the real cost of a round trip ticket on the airbridge should be $600. In the present arrangement on CAL’s Tobago Express service, a passenger pays $150 one way and the state pays an additional $50 for a total of $200 on a route on which the real economic cost of the ticket should be $300. As a result, the airline loses $100 per passenger and even if every flight on the airbridge operated with full load, CAL still loses approximately $6,800.

Further complicating matters for the carrier is its inability to satisfy the continuously increasing demand for seats between Trinidad and Tobago. At present capacity, Tobago Express cannot satisfy peak demand, particularly on busy weekends.

This is due to some extent to the unsuitability of the current fleet of ATR 72-600 aircraft for the airbridge, given their limitations in range, speed and luggage-carrying capacity

Recurring technical problems with the ATRs, purchased at a cost of US$19 million, only add to the financial burden that the route imposes on the Treasury.

Mr Mohammed and the CAL board, based on their testimonies before the JSC, are already well acquainted with the challenges of the airbridge. What is not clear, however, is whether they have yet found solutions to the myriad problems on that route.

Given the country’s economic challenges, something must be done to transform Tobago Express and CAL into an efficient, profitable entity.

An urgent restructure of the airbridge operations is needed and some tough decisions have to be made, not just about subsidies but also whether T&T can continue to wholly own and operate these services.


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