10° 40' N, 61° 30' W

Monday, November 11, 2002

In my pre-wannabe economist days, back when I worked in television, I had a small role to play in the live broadcast of a "Celebration of Vision"-- the party commemorating BWIA's first profit in 50 years of operations. Now, profits are what companies are supposed to make; not making one in half a century makes the first one sweet, I imagine, but it does not make the fact any less true, and it does not need to be celebrated. More than a few CEOs have infamously tried their hand at turning the BWIA around, though, and Aleong and Chairman Lawrence Duprey seemed to have created, finally, the successful strategy.

I thought then, though, that the Country Club live broadcast was a mistake; if the airline was listed on a more transparent and demanding stockmarket, it would have been punished for the hubris of that decision. No investor wants their first profit spent on a big party, of all things, and a big celebration shows that management was taking a greater interest in itself and in flashy headlines than in its own shareholders. An airline, especially, is vulnerable when the next shock or cyclical downturn hits, and having a good cash pile helps tide things over. The amounts spent on such frills may have been small, but it not the figures--it's the impression they create.

Now BWIA has had its annus horriblis, and all are calling for drastic action.

Everyone was caught out by the terrorist attacks of September 11, 2001. Given that shocks and economic cycles play such a huge role in any interational airlines risk profile and bottom line, one would have though that the carrier would have been able to deal with it better. No such luck. The managment team that should have been punished by the markets a couple of years ago for profit-gloating should now be thrown out by investor demand for malfeasance. The right authority has yet to be offended, though, and management, like the airline, flies on.

Martin Daly and Rickey Singh, among others, are calling for a regional air carrier to be set up as an "essential service". An essential service to whom? Conrad Aleong, BWIA's CEO, wrote an update over a year ago saying that the region's people need and affordable means of air travel. While I agree on the need for an affordable means of travel; what I don't see is the need for this affordable means.

The current situation in Caribbean air travel did not just happen; a lot of it was the creation of deliberate policy. BWIA's unions are wondering about the carrier's accounts, and are concerned about "shady dealings" at its subsidiary, Tobago Express. Would this matter so much if the route to Tobago was not a licensed monopoly? In a "community" whose citizens have to use passports to travel from island to island, when most tourists can travel on a driver's licence, the fact that intra-regional transport is expensive is no coincidence.

In Trinidad and Tobago, Barbados and Jamaica, a private means of public transport exists--maxi-taxis or minibuses, dependings on where you live. True, they have to be licenced, and the owners do have to belong to the association. But organisation pretty much ends there. Anyone can enter the business, and anyone can leave. Competition keeps fares down, yet most drivers remain in business--in trinidad, for example, Priority Bus Route Drivers pay a premium for their permits, but their fares are the same as Eastern Main Road or Churchill-Roosevelt Highway drivers, whose routes all terminate in the same place.

It may seem odd to compare "jitneys" to an airline, but ins some ways the same dynamics apply. Why was nothing done, for example, about BWIA's aggressive predatory pricing a few years ago to successfully force Air Jamaica out of offering a route to Trinidad? Why did the Trinidad government allow BWIA an allocation of half of the departure gates at the new Piarco airport terminal? These were not sound positions, and allowed Bwee to carry on as if it were in a favoired position. BWIA's no the only one. The Trinidad Air Line Pilots Assocation has put out advertisments over the past couple of years saying that charter airlines were "dumping" cheap services on the region, and that this was a threat to regional airlines. Where's the right to affordable travel then?

The region has seen the failure of many airlines (EC Xpress, Air Caribbean and Caribbean Star, to name but three in the past four years) and the governments of some smaller tourism-dependent islands feel that they are hostage to the whims of external carriers. Time and again, though, the airlines, unions and governments have organised to keep regional transport expensive. If flights were cheap, safe, and reliable, does it really matter what nationality the airline is? Sentiments like this are peans for perfect safety, for zero risk. The efforts aimed at achieving the security of air travel have failed for over 40 years, and there is no reason to think that the efforts of interested parties will bring this about now.

Perhaps a cheap, point-to-point model should be tried--allow anyone with the capital to set up direct routes between any island, according to demand. Forget service--the no-frills business model of American carriers Southwest and JetBlue, or the European carriers Ryanair and easyJet should be tried. Why only aircraft? Why has there been a decline in ferry travel? The French company L'Express des Iles does a good business in the eastern Caribbean already; why aren't more companies doing this?

Daly and Singh are raising the essential service mantra as if it were the only solution. It's not. Solutions don't always have to be handed down--withness the jitney pehomenon. What is clear is that it involves a measure of risk. Risk is what the BWIA managment were unprepared for, and the avoidance of risk are what the calls for an essential service are all about. Until such attutudes change, such a "crisis" as exists today is bound to repeat itself.