Thursday 23rd June, 2005

 
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What future for BWIA?

FOR MORE than 60 years, BWIA has made an invaluable contribution to regional aviation by carrying millions of passengers to and from destinations in the Caribbean, North America and Europe safely and with warmth.

Regrettably, the airline has not been able to combine the attributes of safety and warmth with the cold reality of profits on any sustained basis.

Many airlines in the world have faced serious problems recently: escalating aviation fuel prices have burdened expenditure while the cut-throat competitive scramble for travellers has forced a reduction in fares.

In addition to these significant problems, BWIA has received conflicting signals from its main stakeholder, the State, such that if the Government were an air traffic controller the airline would have been doomed to crash.

First the Government wanted Latin American routes, and then it didn’t.

The Prime Minister says that the airline could be shut down one week and the next week the Minister of Trade says the airline’s future is bright.

The Government speaks about setting up a holding company to merge Liat and BWIA in one breath and in the next breath is giving millions to support Liat and BWIA as separate entities.

BWIA itself has received hundreds of millions of taxpayer dollars in the last three years since the airline’s fortunes took a turn for the worse after the September 2001 terrorist attacks in the US.

The fact is the Government has wrung its collective hands endlessly over the airline’s future and has had the benefit of a number of reports on BWIA.

This year alone, there has been a report on the airline’s future which came from the airline’s board. That report was referred to one Cabinet sub-committee, which deliberated on it for months. It was then referred to a second Cabinet sub-committee which did some more deliberations.

Not being able to come to a conclusion, Cabinet decided the issue of the airline’s future deserved even more study and appointed a task force headed by one of this country’s most prominent businessmen, Arthur Lok Jack.

The task force was given terms of reference which included three options: the closure of the airline, with no replacement by a state-owned air transport company; the closure of BWIA, with the establishment of a new airline which could be wholly or partly state-owned; and the restructuring of the airline.

All of the options studied by the task force come with a large bill attached:

The closure of the airline will cost between US$170 million and US$350 million (between $1.1 billion and $2.2 billion).

The establishment of a new airline is estimated to cost more than US$350 million ($2.2 billion).

The restructuring of the airline has a price tag of US$250 million ($1.5 billion).

In all cases, the cost of implementing any of the options would fall on local taxpayers, given that the State now holds over 75 per cent of BWIA’s shareholding.

While the Government may think it appropriate to undertake such an expenditure, it should only do so after the appropriate cost/benefit analysis.

Also, a decision on the airline’s future should only come after the Cabinet has considered one other option: selling the airline’s assets to a new entity.

While there may be temporary dislocation and inconvenience to the travelling public in the form of higher air fares, this can be quickly mitigated by the encouragement of competition on some of the routes most favoured by T&T businessmen, leisure travellers and students.

The sale of the airline’s assets would reduce the estimated $2 billion it would cost to close down the airline and special arrangements could be put into the sales agreement if necessary.

It should be noted that Barbados, one of the region’s most successful tourist destinations, does not have a national carrier. Neither do any of the other tourist countries in the region except Jamaica—whose government is facing much the same concerns as T&T’s.

 

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