Saturday, December 17, 2011

REDjet looks to new routes

LOW-cost Caribbean airline carrier REDjet, which last month began flying from Barbados to Jamaica, Trinidad, Guyana and Antigua, is looking to add new routes as it begins to fine-tune its operations.

On the 20th of November, REDjet launched its inaugural flight from Port of Spain, Trinidad & Tobago, to Kingston Jamaica. The next day it flew from Trinidad to Barbados and the following day it flew nonstop direct from Guyana to Antigua, the first time that route has ever been flown.

In effect, the airline opened up three new routes rather quickly and is looking to expand on those. It has already lined up flights to St Lucia and is now contemplating operations in Latin America.

Speaking to Caribbean Business Report from the airline’s headquarters in Barbados, REDjet’s chairman Ian Burns said: “The real key thing is that we have now linked the northern Caribbean to the eastern and southern part of the region with a nonstop all-jet service. We made the promise that we would reduce the cost of flights in the region by 60 per cent and we have done so. If you look at the prices in the region there has been a fantastic reduction. One can fly from Jamaica to Barbados round-trip for just US$200.

“From Barbados to Guyana the fare is between US$100 and US$120 including taxes. A round-trip from Trinidad to Barbados will set you back about US$90. The great thing about linking the Caribbean is that you don’t need visas, you just grab your passport and away you go. We are now linking the Caribbean in a very affordable way.”

A helping hand to Caribbean students

Burns points to the travel bill of students of the University of the West Indies (UWI) and notes that is yet another hardship they have to bear on top of high fees and the rising cost of living. He declared that as far as air travel is concerned, REDjet is now able to cut airfares by over 50 per cent for students.

Already REDjet is allowing students in the region to travel with two free bags. He insists that even with baggage, students would still see a 50 to 60 per cent reduction in airfares. He believes those savings can go back into education and during recessionary times students need every penny that they can get.

Targeting the Spanish speaking region

REDjet has considered going into Suriname, but is aware that it already has a national airline. Countries that do have a national carrier will no doubt prove difficult for REDjet to go up against.

The airline’s ambitions do not reside just in the English-speaking Caribbean. It sees plenty of opportunities in the Spanish-speaking side of the region and has set its sights there. “If you are going from English-speaking countries into Spanish-speaking countries, then you have to make a sizable investment in the sense of changing systems, language and specifications on all aircraft designated for those destinations. We are now in the process of doing all that. We have a critical plan in place for the Spanish-speaking countries of the region. The populations are obviously bigger than the English-speaking Caribbean countries and we think we can make our presence felt there,” explained Burns.

More airlift needed for the Caribbean

Many have declared that the Caribbean Single Market and Economy (CSME) and Caricom as a whole has been most disappointing and indeed may well become a failure. One of its shortcomings has been its inability to effectively link the region by air travel which stymies the search for employment opportunities and leisure travel. The linchpin of both the social and economic benefits of the CSME was to be good air links, but after fifty years this has not yet materialized.

On this issue, Burns said: “Most of the countries of Caricom have made it clear that they need more airlift as a key driver of stimulating social and economic growth. What people have not agreed upon is, how are they going to do it? What is plain to see is that the incumbent airlines do not have the capacity to increase the amount of airlift in the region and have been unable to do so for the last 40 years. In fact, it has retracted, so one clearly sees that new airlines in the Caribbean are needed. We need people with a new approach and a new product. The Caribbean region has fallen way behind in competitiveness over the last 20 years, and the cost of air travel has been a major factor here. That’s why many people, both in and out of the region, find it difficult to do business there. Here I’d like to think that REDjet is a catalyst for serious change. When one looks at communication, Digicel came in ten years ago and nothing has come in afterwards. We want to re-energize the airline business in the Caribbean.

“Recently the minister of finance of Barbados was talking about an inner and outer Caribbean. I think that is a retrograde step to say that; after all, Barbados is responsible for the CSME. The region is supposed to be a single market, not an inner and outer disparate entity. What we are finding over the years is that decisions are being made based on what countries in the Caribbean cannot have airlift. Barbados is now deciding which countries around it can have low-fare airlift and I don’t think that is right. You shouldn’t be able to determine for another country whether they can or cannot have a low-fare carrier. Clearly not every country can afford to start an airline because the markets just aren’t big enough. When you have an airline , you have a responsibility to the region and to the consumers not just in your own country. That has to be taken into consideration far above any narrow sense of agenda such as protection of a local airline.”

Red tape eating away at REDjet’s initial US$8-million investment

REDjet’s Barbados partner, the chairman of Williams Industries, Ralph “Bizzy” Williams, has said that excessive delays and suffocating red tape had eaten away at the initial US$8 million set aside for operating expenditure. Now with 100 staff members and three routes secured it finds itself financially constrained and unable to aggressively go about taking market share.

“The money had to be used in all of the delays that took place while we were waiting for permission to fly. We had to use it to pay staff and keep things going though we were not flying.... I am going to lose millions of dollars.

“I believe the technocrats decided that the politicians were wrong in designating REDjet as the national airline of Barbados, so the politicians had to wait on them to proceed; they are the ones who sabotaged us,” Williams is reported to have told the Barbadian press.

Wherever REDjet has gone, it has been met with resistance and a surfeit of bureaucracy that is an abject lesson in how to prevent foreign investors coming to your shores. So what are Burn’s thoughts on this matter?

“Decision making throughout the Caribbean is unbelievably slow and people seem afraid to make decisions. This prolonged decision-making process causes frustration and heightens tensions and leads to the wasting of money. Obviously decisions have to be considered and measured but it has to be much speedier than what currently pertains in the Caribbean. It should be a much more open and transparent process.

“You have people hiding behind closed doors. No one will tell you what level of subsidy Caribbean Airlines and Liat got last year and yet this is taxpayers’ money and taxpayers are entitled to know these things. Governments here tend to adopt this clandestine approach to taxpayers’ money and I don’t think that is right. The taxpayer and consumer should be given far more consideration. Today people want more information and that should be embraced. It’s not the government’s money, it’s the taxpayers’ money and they want to know how it is spent. We have experienced some horrendous delays with governments which have cost us a fortune. For example we have been looking at four routes over the last two years which has meant that Barbados has lost 125,000 passengers which means US$58 million could have entered the economy which will not come back. Now that doesn’t just hurt Barbados, it hurts its neighbors as well.”

Getting a hard time from the competition

REDjet’s CEO added that he is fully aware that many other Caribbean carriers do not want REDjet in the region and regard it as a threat to their business. He mentions that a CEO of one of the key regional carriers came on television and said REDjet has forced it to reduce its fares on certain routes.

“Now that’s something they shouldn’t be announcing with a heavy heart. It’s something that they should be striving to do. It should be one of their internal objectives. To say that you have been forced to reduce fares is symptomatic of the attitude that has prevailed and why airfares are so high in the region,” said Burns.

Four new aircraft for next year

REDjet currently has two airplanes with a third expected to be operational this month. There are plans to add a further four aircraft next year.

However the airline is not yet certain of what routes it will be flying and therefore cannot be more specific as to when the additional planes will become operational, as Burns says, “ It’s not in our economic interest to bring in planes and then wait for routes. The really bright spot in terms of doing business in the region is that five countries gave REDjet permission to fly before Barbados did."

St Lucia, St Kitts, St Maarten, Antigua and Grenada all want low fares because they have lost jet services to their countries with Caribbean Airlines pulling out and Air Jamaica no longer going down there, meaning these countries have lost significant airlift. Unfortunately Caribbean Airlines and Liat will not bring back those numbers, so therefore we are the only show in town.”

REDjet’s Boeing aircraft are comfortable and the service is friendly. Passengers are not cooped up on top of each other. Although 179 seats could have been put, in to make flights more comfortable, they opted for 149 seats in order to give passengers extra leg room. Burns says he is very pleased with the feedback so far and that passengers have taken well to the product.

“We have started a brand new business, a business that didn’t exist before. The way we go to market is different from other airlines. I think people are finding it very easy to do business with REDjet and in fact other airlines are beginning to copy our distribution models. We seem to be able to engage with the average person on the street. Our passenger is generally someone who was not able to previously travel because of cost,” explained Burns.

Based in Barbados

So what advantages does he see being based in Barbados? He responds by reiterating that REDjet is a Pan Caribbean airline with a model that sees it having a number of bases throughout the Caribbean. “Barbados happens to be the country that said yes first, so we were always going to be based here. We would love to have a base in Jamaica and three other bases in the region. Being in Barbados means that we have received a degree of political acceptance although over the last two months the waters have been muddied a bit. These things we will overcome. We are very grateful that Barbados said yes to us first.”

The northern Caribbean is clearly more populated than the eastern Caribbean and so REDjet will be concentrating its commercial activity in terms of flying on the northern and western Caribbean. However, it will remain headquartered in Barbados for the foreseeable future.

Airlines can be run profitably

“Our objective is that everyone can fly somewhere for US$50. No other airline thinks that way. If you look at fares over the last four years they seem to be increasing at a quick rate despite everybody having either a fuel or government subsidy. That is no good for the people of the Caribbean. It seems to me that the more money these governments put into these airlines the higher the fares go. So where is the money going? No one appears to be accountable. You can understand why there is institutional resistance to REDjet because people will have to become accountable for what they are doing, because competition means if they don’t provide a decent service at a fair reasonable price then the passengers are going to keep going to where the cheaper fares are. Now why do I say this? Because on the routes that we fly where there is competition, the fares have come tumbling down. If you have to keep putting taxpayers’ money into a business every year then it is a failure, don’t you agree? The bottom line is that airlines can be run profitably and I think it is incumbent on the political body within the region to make airlines much more accountable in terms of the dollar spend and making the taxpayers’ money go further,” said the REDjet boss.

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