Thursday, April 19, 2012

Caribbean Airlines jet in Mexico - New questions over London route

By Vernon Khelawan
Thursday, April 19 2012

DEFUNCT state-owned airline British West Indies Airways (BWIA) dropped the London route because it was losing millions of dollars annually. So what made former Caribbean Airlines (CAL) chairman George Nicholas III and his board believe they could turn the situation around and make the trans Atlantic route profitable?

Business Day learnt from Ian Bertrand, a former chief executive of BWIA, now an aviation consultant, that the only time the London route was profitable was during the period during which the L-1011TriStar (BWIA had four of these airplanes) was operating the service. He explained that the TriStar was a flexible aircraft in that it could have been pressed into service to any of the airline’s North American destinations, particularly New York and Toronto.

According to Caribbean Airlines (CAL) insiders, the decision to return to London was that of Nicholas, who publicly announced the plan during a function in Kingston last year. Earlier at the signing of the order for nine ATR-72-600s in Port of Spain, Nicholas told Business Day, he was re-introducing the London route to Heathrow in July 2011 using leased B-777s. Business Day understands the resumption of the London service was never a board decision.

Having caught his management team and fellow board members off guard with his announcement, it turned into a mad scramble to put things in place to get the service going by June 14, 2012 and not to Heathrow but to Gatwick instead, using not B-777s, but rather two used B-767-300ERs owned by the South American airline Lan Chile.

The first of these two aircraft was due in Piarco last week Tuesday (April 10), but its arrival has been delayed by a month, but no explanation for the delay has been given by the airline. However, Business Day has learnt that the aircraft, which has already been painted in CAL’ colours is sitting in a hangar at an airport in Mexico City, Mexico. Configuration of that aircraft, which will be registered 9Y-LGW, is 30 First/Business Class and 191 in Economy. There has been no word on the second aircraft, which will be registered 9Y-LGH, except the promise it would be in Trinidad by the end of May. Industry observers are questioning the wisdom of Nicholas’ decision to return to London, albeit Gatwick, given that the conditions for such a service is now much worse than when the airline started in 2007. While CAL enjoys a generous subsidy from the Trinidad and Tobago government, the four times a week service would account for a substantial increase in fuel consumption, more so, given the age of the chosen aircraft to operate the route.

Other factors include the current high transAtlantic fares, the pernicious Airport Passenger Duty (APD) imposed by the British authorities, the soft economy which now exists in the United Kingdom and a severe reduction in the Caribbean diaspora in Britain. Information about reservations for London reflects a large number of inquiries, but not a high percentage of bookings.

But the fact that airplanes, ordered by CAL are ready for delivery, but not being delivered, has raised question in many circles. There are two brand new ATRs sitting in Toulouse, France and there is a B-767-300ER, in CAL’s colours and livery in a hangar in Mexico City and the word is money problems.

Business Day has learnt that the ATR company is not prepared to release the aircraft without some proper monetary arrangements being put in place. As a matter of fact it is understood that a team from ATR will be in Trinidad this week for discussions with CAL and government officials on how to proceed with the other five planes which have been ordered, as well as the two (TTC and TTD) that are ready for delivery.

Meanwhile a question still floating around the corridors of the Iere House headquarters of the airline at Piarco, is the real reason behind Nicholas’s sudden departure? Managers, as well as line staffers refuse to believe it was because of the rating given him by Transport Minister Devant Maharaj during a recent television interview.

Most people believe that seeing the financial mess in which the airline had found itself, Nicholas decided he did not want to be around to do any cleaning up when it finally hit the fan. Insider reports indicate that the finances of the company are in total disarray and since Corporation Sole has not been brought up to date with all the financial issues, much support has not been forthcoming from that source.

The situation in which CAL today finds itself has been a direct result of a board of directors whose members were so far removed from aviation that it was almost impossible to create policy and give proper guidance to the company operating in such a highly competitive environment. This allowed the chairman to become autocratic and reduced the board to being “yes men”. Nobody stood up or argued with Nicholas and the two people who attempted to do so – Allan Clovis and Susan Smith — were dismissed.

And while Minister Maharaj’s counter to this argument that management skills were most important does in fact carry some weight, the present environment, added to the volatility of the industry, makes it imperative that the board has some real understanding of the industry. Additionally, there is no comparison between the present board and the quality of the previous leaders.

It is no secret that following one of Nicholas’ previous resignations, the present board assured the line minister they would work with the chairman for the betterment of the airline. Obviously that has not worked to the benefit of CAL’s fortunes. Now that Nicholas has left, is there any real reason they should stay?

Business Day has also learnt that when possible Chief Executive Officer designate Pedro Fabregas, wooed from American Airlines, was last year invited to a CAL board meeting, he was moved to request that he be allowed to bring in a team to work at turning around the airline, but his request was denied. Although it was never spelt out, Fabregas felt he alone could not effect the changes needed in the airline.

Fabregas never took up the job and up until today the vacancy, created when Ian Brunton was dismissed, still remains unfilled, as does the position of Corporate Communications Manager, vacant since the dismissal of Laura Asbjornsen almost a year ago.

The call is being made again from many quarters for Minister Maharaj to use this opportunity to reconstitute the airline’s board by selecting persons who can actually make serious efforts to turn the airline around, before continuing to throw good money after bad. Also, the call is being made to chairman designate Rabindra Moonan to request a review of the current board, so that his job could be made easier.

Failure to at least make the request, could end up with even more problems regarding the airline’s operations.

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