No lower airfare without mergers

Barbadians and other Caribbean nationals crying out for cheaper air fares should not hold out hope of such an ease unless regional carriers, including LIAT, join forces.

And Caribbean Development Bank President Dr. Warren Smith today said his organisation was ready to fund a new regional air transportation policy so such “strategic alliances could be forged. Smith was speaking at the CDB’s Wildey, St. Michael headquarters this morning as the governments of Barbados, Antigua and Barbuda, St. Vincent and the Grenadines and Dominica sign agreements for loans worth US$65 to be lent to LIAT for its Fleet Modernisation Project.

The official, is a former LIAT CEO, said his organisation anticipated that use of the new funding which will be used to modernise the airline’s fleet and restructure its operations and has to be repaid over 13 years by LIAT itself, “will lead to an overall improvement in the financial performance and … the operational efficiency of LIAT”.

But he cautioned that this alone would not translate into cheaper air transportation in the Caribbean and that there was a need for alliances and new air transportation policies. “We must always be mindful though of the many challenges our region’s air transportation sector faces, including that of small non contiguous islands, sparse intra regional traffic, short routes and the inevitable lack of economies of scale,” he said.

“The management and shareholders of LIAT in my view have responsibility to educate the traveling public about the realities of providing reliable air transport in this context. In short, the public needs to appreciate that given these structural realities stand alone intra regional air transportation service is unlikely to deliver on the desire for low cost air travel.

“A possible solution for this dilemma therefore is to forge strategic alliances with larger regional and extra regional carriers. This would enable the achievement of increased economies of scale, cost efficiencies and shared services.

“To facilitate such alliances an appropriate policy framework and enabling environment will need to be in place. To this end, … policymakers will have to revisit the issue of a regional air transport policy. Let me state here and now that the CDB stands ready to provide financing for such an undertaking,” Smith stated.

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