At a Caribbean aviation conference in the Bahamas last week, Tropic Ocean Airways chief executive Robert Ceravolo prompted laughter and nods of familiarity in the room when he told the story of a traveller he met while en route to Nassau.
The passenger had started her journey in the British Virgin Islands and it had taken her 30h to travel to Hope Town in the Bahamas. "She took three airlines, two boats and multiple taxis," says Ceravolo, pointing out that he recently flew to Shanghai from the USA in less than half of that time.
Stories of long and unwieldy itineraries are common within the Caribbean. For example, Greg Phillip, chief executive of the Nevis Tourism Authority in St Kitts and Nevis, flew to Miami to catch a flight back down to Nassau to attend the conference, the Caribbean Aviation Meetup.
Capacity within the Caribbean has fluctuated in recent years. For the year ending June 2018, intra-Caribbean capacity was flat compared with levels five years ago, FlightGlobal schedules data show. This is despite a 5% and 8% year-on-year growth reported in the year ending June 2016 and June 2017, respectively. Capacity for the year ending June 2018 was down 10% compared with the year ending June 2017, following a series of hurricanes that impacted some airports in the Caribbean.
FlightGlobal schedules data
Ceravolo believes there is potential for seaplane operations in the Caribbean, which will adequately meet inter-island demand in some markets without requiring the million-dollar investments for new airport infrastructure. However, he indicates that the reception from Caribbean carriers to potentially partnering with a company like Tropic Ocean has been far from warm.
"Airlines in the Caribbean have massive national identities, they are a big source of national pride," he says. "There is this irrational fear that a foreign partnership will take jobs away, so there is a building of walls. All of us disagree with that platform, but why do we allow it to flourish within the Caribbean?"
As a result, Caribbean carriers are losing ground to their privately owned foreign counterparts, some of which have successfully built up a network in the region. Among the top five airlines in terms of capacity within the Caribbean, only three are from the region: Caribbean Airlines, Cubana and LIAT, FlightGlobal schedules data show. Among these carriers, Cubana is grappling with operational difficulties due to a lack of spare parts for its fleet and the recent crash of a wet-leased Boeing 737 operated by a Mexican charter carrier.
British Airways and JetBlue Airways are the fourth and fifth-largest carriers in the Caribbean in terms of capacity, FlightGlobal schedules data show. JetBlue, for one, has built up a focus city in San Juan, Puerto Rico, where it operates to six destinations in the Caribbean.
The challenge of regional connectivity in the Caribbean needs to be integrated into a wider plan to support the tourism sector, says Joy Jibrilu, the chairman of the Caribbean Tourism Organisation and director general at the Bahamas tourism ministry.
This is especially important, given the impact on tourism demand following a series of damaging hurricanes in 2017, which Jibrilu says has led to an estimated $1 billion loss from reduced Caribbean hotel bookings.
Demand was affected even in Caribbean islands – estimated by Jibrilu as two-thirds of the Caribbean – that were not severely impacted by the storms, as a result of travellers' misconceptions that the entire region was afflicted.
Some governments in the Caribbean are coming around to the idea of partnering with private carriers to improve connectivity, with the Bahamas' tourism minister, Dionisio D'Aguilar, saying he wants state-owned Bahamasair to focus on longer-haul and more profitable routes to bring US travellers to the islands.
"Bahamasair is heavily subsidised and it is still viewed as an airbus service or jitney that will take us from island to island. This has contributed to significant losses for the carrier," D'Aguilar tells FlightGlobal on the sidelines of the conference.
The airline receives $15 million in annual subsidies from the Bahamian government but reported about a $20 million net loss in 2017, says D'Aguilar. The carrier is in the process of reducing its headcount through attrition, and hopes to shed another 16% of its workforce of about 630 employees, says the airline's chief executive, Tracy Cooper.
D'Aguilar believes that inter-island transportation is best served by privately owned operators, freeing up Bahamasair to grow point-to-point service from the USA to other Bahamian destinations besides Nassau.
Cooper says the airline's ATR turboprops could be better utilised on service from Florida, rather than operating on domestic routes with "50% load factors".
However, while he says there is a "good gamut" of local operators that could be up to the task of providing inter-island transportation in the Bahamas, he acknowledges that there is still a need to co-ordinate and for "getting people to buy in".
"You can't force anyone to do it," says Cooper. "Until we get that in place, we will continue to serve the local market."
In the meantime, Bahamasair has agreed to purchase a Boeing 737-700 from AerCap, adding its first 737NG to its fleet in December. The airline will use the new jet to add more capacity from Florida to the Bahamas, says Cooper.
LAYERS OF TAXATION
Caribbean governments collect more than a dozen different taxes on airfares, ranging from departure taxes to airport improvement taxes to embarkation fees and sales taxes, says Nick Wangler, president of air service consultancy Forecast Inc.
Such taxation has a dampening effect on demand for travel to the Caribbean by driving up final ticket prices, industry players reiterated at the conference. For example, Wangler points out that almost 37% of his $241 round-trip ticket from Fort Lauderdale to Nassau – or about $88 – were taxes paid to the Bahamas.
In comparison, the same itinerary included about $36 in US federal taxes. The round-trip base fare charged by Southwest on the ticket was just $90. As a result of the foreign taxes, flights within the USA to other leisure destinations during the same timeframe are cheaper, says Wangler.
With hefty taxes in the Caribbean, foreign carriers that are bigger and have a lower cost structure end up having an advantage over the smaller players in the Caribbean because they can charge lower base fares.
Even more damaging is when taxes are levied on a flat-rate basis regardless of flight distance, says the former tourism minister of the Bahamas, Vincent Vanderpool-Wallace, who runs a travel and tourism consulting business.
"When you fix taxes on tickets, you punish the people closest to you," he says, pointing out that flat-rate taxes are more likely to deter a traveller who is closer to the Caribbean than a passenger flying from London as the taxes will be a higher proportion of the overall ticket price.
"The biggest single market for the Caribbean is the Caribbean itself," says Vanderpool-Wallace.
Compounding the challenges for the Caribbean airline industry is the fact that airline chief executives do not stay in their jobs for long, with many being replaced depending on who is in charge in the government.
Cooper points out that he is the longest-serving chief of a major Caribbean carrier, despite being in the role for only about two years.
In Antigua and Barbuda, state-owned airline LIAT has had three chief executives over a period of five years. Trinidad and Tobago's Caribbean Airlines appointed its latest chief executive, Garvin Madera, in October 2017 after a number of leadership changes in prior years.
Source: Cirium Dashboard
