Caribbean Airlines’ explanation last week on the airline’s challenges on the Trinidad to Tobago route was nothing new to us.
For years we have known of the difficulties of servicing a short 52-mile route with all the expenses that come with operating an airline.
But with the Tobago House of Assembly’s Chief Secretary Farley Augustine insisting the airline isn’t doing enough to service Tobago, perhaps the time has come to revisit the effectiveness of the subsidised airfare.
From Augustine’s viewpoint, the argument is simply about providing more seats for would-be tourists.
He’d noted in June that all seats on Caribbean Airlines were booked right through to the Tobago Carnival October and yet hotels were at 50 per cent capacity.
It suggested that a large number of passengers were Tobagonians flying between the islands but not added value to the island’s tourism product.
Promising to pay for later airport opening hours, he’s repeatedly called on Caribbean Airlines to add more flights.
The airline, however, is counting its pennies, noting that flying to Tobago since the borders were reopened, amounted to operational costs of US$18,777,648 as at June 2022, and losses of US$9.6 million.
To be fair, the airline too is struggling to return to the pre-COVID era with even higher fuel costs than before. Limiting the number of flights to Tobago, therefore, is part of its cost-containing measures.
With the cost per flight hour as high as US$17,306, it’s no surprise the airline pointed to “low prices which do not reflect actual market value” as one of its concerns.
This, of course, is a matter for Finance Minister Colm Imbert as Corporation Sole.
In the 2013/14 Budget his predecessor, Larry Howai announced the suspension of the US$50 million fuel subsidy to Caribbean Airlines from October that year.
The Government continued, however, to support the airbridge to the tune of around US$26 million.
The problem, though, is that while the airline was asked then to continue operating by paying the market price for fuel, the airbridge subsidy was not matching the market price for fares.
Since 2005, the adult fare on the air bridge has been fixed at $150 one way, irrespective of rising fuel costs.
The actual breakeven fare on the air bridge is $300 one-way and of that sum, while the passenger currently pays $150, the Government subsidy to the adult passenger only is $50 (children receive no subsidy from the Government) and Caribbean Airlines absorbs the loss for the remaining $100 or $150 depending on if the passenger is a child but occupying a seat.
This cannot be sustainable, particularly when the cost of fuel is significantly high.
While removing the subsidy in full can have a severe impact on travel between the islands (with a return ticket jumping to $600), the Government must consider the airline’s concerns by considering at least a partial removal.
The high demand for seats suggests that passengers will pay more for the convenience of being able to fly when they wish, as often as they wish.
There is little option otherwise for a win-win situation. Tobago will continue to suffer if more planes don’t fly, and the airline will suffer if more of its planes take to the air without more revenue.
The tough choices must be made at least by the next Budget if this issue is to be resolved to the benefit of most.
