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The Cost of Connecting the Caribbean: Overextensions, Fruitless Expansions and Disappearing Brands
Looking across the U.S., it’s common to see carriers cancel unprofitable routes in order to move aircraft to more popular and profitable routes. Whether it is a single route or the dismantling of an entire hub, carriers are not shy about doing what they can to maximize their profits. However, the Caribbean poses a different issue, with many local carriers hanging onto years worth of unpaid debt to keep the island connected to the world. This series dives into the carriers of the Caribbean and their tough decisions between trying to keep their island connected to the world and turning a profit.
While some Caribbean airlines such as Winair have successfully restructured themselves and managed to turn profits, the clock is ticking on others including Leeward Islands Air Transport, Cayman Airlines and Bahamasair, and the sun has already set on others such as Air Jamaica and American Eagle.
The island-hopping airline, commonly known as LIAT, is joint-owned by the governments of Barbados and Antigua, but its poor management of expenses has left the politicians flustered.
The carrier has lost over $100 million in the last few years while doing little to trim their extensive route map and double-digit fleet size. To further complicate things, LIAT tends to suffer from employee unrest with the airline seeing three strikes – one in 2010, one in 2013 and another in 2017 – plague their ability to provide adequate service to the region.
When the airline does attempt change, however, it doesn’t always end well. In 2013, LIAT made a move to overhaul their aging de Havilland DHC-8-100 and DHC-8-300 fleet with ATR 42s and 72s. However, flight delays and cancellations caused by the ATR’s maintenance issues in their first few months caused the airline to lose an estimated $100 million through the fleet transition period.
Despite the decrease in operating and fuel costs, the airline is still needing money injected into it to keep afloat. The last $150 million boost came from Barbados with demands for the carrier to find a path to profitability soon. Barbados isn’t alone, with other island-nations that have a stake in LIAT demanding the airline find ways to trim costs and turn a profit.
While Bahamasair has found a way to stem losses, it hasn’t come without its fair share of controversy and accusations. According to competitors Western Air and SkyBahamas, Bahamasair has artificially priced their airfare well below profitability with the hopes of attracting more travelers. The privately-funded carriers claim this practice hurts their business and Bahamasair is going down this road knowing that the government of Bahamas will bail them if the losses pile up.
The national airline of the Bahamas, Bahamasair has struggled to remain profitable with the airline seeing losses float around $20 million per year. The last two years alone saw losses of $16.6 million in 2016 to $22 million in 2017.
While artificial pricing is one tool that Bahamasair has taken to attempt to win over passengers, the carrier hasn’t slowed their expansions and fleet overhaul. The airline first replaced its Boeing 737-200s with used Boeing 737-500s between 2012 and 2014. Following that deal, the airline went ahead and replaced their turboprop fleet as well, with the de Havilland DHC-8-300s being phased out in 2016 in favor of brand new ATR 42s and 72s.
The airline has also expanded service in hopes of fighting off smaller carriers, including Florida-based Silver Airways, SkyBahamas and Western Air, by offering increased service to alternative Bahamian islands, while also launching new routes such as Nassau to Port-au-Prince, Haiti.
Unfortunately, the trend of overextension and unprofitability continues across the Caribbean to the island of Jamaica. The Jamaican government poured millions into its national airline, Air Jamaica, which was unprofitable 47 of their 49 years of operations. The airline bled cash with one failed experiment after another, including a regional branch called Air Jamaica Express that operated between 1996 and 2005 and flights to London using aircraft as large as Boeing 747s.
The airline also had a tendency to overhaul their fleet frequently, taking hold of whatever they could get cheap. Aircraft including the Airbus A300, A340, A310, Boeing 727 and Douglas DC-8 appearing in the fleet before the airline went to an all-Airbus A320 family fleet in the early 2000s.
Eventually, the government of Jamaica had enough and sold the carrier to Caribbean Airlines. By that point, however, the airline was still in debt for $1.54 billion, so Jamaica had to take a small stake in the newly-merged Trinidadian carrier in return for the sale. Under Caribbean Airlines, Air Jamaica saw another fleet overhaul, switching to Boeing 737-800s, before legal issues eventually forced the airline to fade away entirely in 2015.
Not far from Jamaica, Cayman Airways has been teetering on the edge, floating around $20 million in losses per year since the turn of the century. This consistent failure to turn a profit has come with it’s fair share of critics, who demand that the carrier find ways to make itself profitable.
While the airline hasn’t outlined a path to profitability, Cayman hopes the arrival of its new Boeing 737 MAX 8 aircraft will reduce costs compared to the older Boeing 737-300s.
American Airlines has also attempted to connect the Caribbean and the continental United States via Puerto Rico, with the hub seeing varying degrees of success. To counter Eastern Airlines’ Miami hub in the 1980s, American Airlines established a hub in San Juan in 1986.
The airline began operating numerous mainline flights between the East Coast of the mainland and Puerto Rico to connect passengers onto American Eagle ATR turboprop aircraft to ferry them onto their preferred islands. While the San Juan was originally a massive success, the hub’s fate changed after American inherited the Eastern hub at Miami in 1989.
As more passengers preferred the transfer at MIA over SJU, the San Juan hub was slowly dismantled through the late 1990s and early 2000s. The airline would also see profits to leisure destinations drop post 9/11, making the San Juan hub very unprofitable. While American still maintains a presence at the airport with service from its mainland hubs, its status as a hub is nonexistent, with the end of the iconic New York-San Juan route marking the unofficial end.
The Future for Caribbean Aviation
Despite the abundance of carriers that service the Caribbean, a glance at their finances paints a picture of airlines struggling to stay afloat. However, this will not change each island’s goal to remain competitive and hope to draw in as many visitors as possible, even if it means holding onto expensive routes and enduring heavy losses.
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