‘A subsidised fare for Tobago residents and an economic fare for non-residents’
RETIRED chairman of the Trinidad and Tobago Civil Aviation Authority, Ramesh Lutchmedial, is sounding alarm over the domestic operations of Caribbean Airlines, noting that even if airbridge flights are operated at 100 per cent load factors, the revenue earned by airfare and subsidy is well below the economic cost of providing the service.
CAL had previously responded to a public statement by the Tobago House of Assembly (THA) Chief Secretary Farley Augustine who knocked the airline for not providing enough flights to Tobago.
CAL’s responded by stating that its airbridge operations are plagued by heavy and consistent losses amounting to millions of dollars.
In a news release yesterday, Lutchmedial said CAL and its predecessor, BWIA, rarely achieved profitability throughout their existence, requiring taxpayers’ support to the tune of billions of dollars to remain airborne.
“More recently, the Covid-19 pandemic negatively impacted CAL’s ability to achieve the objectives of its recovery business.”
Lutchmedial said while stakeholders like the Tobago Business Chamber, the THA and hoteliers have a right to clamour for more flights, serious underlying issues must be tackled.
“The airline industry is extraordinarily complex and requires lots of cash to meet capital and operating expenses. Airlines are in business to operate profitably, and air fares and flight schedules are set to make a profit. For every route, airlines determine the cost to produce a seat on the flight and the realistic passenger loads at which the revenues generated meet the cost of operating the flight,” Lutchmedial said.
He noted that the airbridge does not afford passengers the luxury of showing up at the airport at any time to board a flight.
“Airline flight schedules are structured based on passenger demand, travel patterns and convenient travel times to achieve the optimum load factors. Besides, flight operations, flight-crew duty times, maintenance and air-traffic procedures are strictly regulated by law to ensure that the highest levels of operational safety are achieved. Further, on the domestic air bridge, demand is not always constant or balanced. Demand is directional on certain days such as Fridays to Tobago and on Sundays to Trinidad,” he stressed.
Lutchmedial further pointed out that the Government has a public-service duty to provide air transport linkages to support social and economic activities in Tobago.
“Most passengers who are domiciled in Tobago and use the airbridge for essential travel may not be able to afford the full economic fare. Therefore, the solution may well lie in a two-tier fare system, a subsidised fare for Tobago residents and an economic fare for non-residents.”
He indicated that in 2017 a CAL official told a parliamentary select committee the present airbridge airfare of $300 had been fixed for over ten years and did not cover $600-$700 operating costs, even with a $100 government subsidy.
|Lutchmedial said today the cost of providing a return passenger seat on the airbridge using an ATR-72 aircraft is about $1,000.
“With a $400 revenue for a trip, this results in an operating deficit of $600 per return seat, and $40,800 per return flight using a 68-seater ATR72-600 aircraft. Even if airbridge flights are operated at 100 per cent load factors, the revenue earned by airfare and subsidy is well below the economic cost of providing the service,” he outlined.
Lutchmedial added that CAL must receive the cost of providing the airbridge service through an appropriate means such as a subsidy.
In a release last Thursday, CAL said that its domestic operation was characterised by consistent losses (US$9,613,100 as at June 2022) and other critical variables such as subsidised flights, high operating costs, low prices which do not reflect actual market value and one-way peak demand periods outside of the July-August school holiday period.
However, Tobago Business Chamber chairman Martin George called on the airline to withdraw the news release, which he said appeared to place blame on the domestic airbridge for the airline’s economic woes and failures over the years and make an excuse for not increasing flights between Trinidad and Tobago.
“If that is the case, and I hope it is not, I am willing to give Caribbean Airlines the benefit of the doubt to clarify that point…then I take very strong umbrage to that, not just as the chairman of the Tobago Business Chamber, but also as a citizen of Trinidad and Tobago, because we all know that this airline, since it was born, has been characterised by losses,” George said.
By: Andrea Perez-Sobers