Discount Carrier Struggles to Fly in Caribbean

Red jetThe Caribbean’s first discount airline is having a rough time getting off the ground and the company’s Irish chief executive blames political fear of competition for the region’s government-affiliated carriers.

Ian Burns dreams of creating a Caribbean version of Europe’s cut-rate Ryanair, advertising flights for as little as $10 that would make it dramatically easier for people across the islands to fly and do business, boosting the region’s economy. People in the Caribbean have long complained that costly, inefficient air service has choked back investment and jobs.

But regulators in two key countries have not yet given Burns’ REDjet permission to operate. And so far he’s unable to offer any flights to the United States, the most important source of travelers and trade for the Caribbean.

“There is obviously some sort of political interference going on. Our point is, let the consumer decide by giving them a choice. We’re not going to cost the taxpayers a bit of money if we fail, so why can’t the market decide?” Burns told The Associated Press this week.

Burns, a former partner of a British accounting firm and a past president of Dublin’s Wanderers rugby club, has no previous experience running an airline but he seems to have plenty of business connections. He says he is “close friends” with Irish telecommunications tycoon Denis O’Brien and has received counsel from top brass at Ryanair, the Dublin-based airline that thrived during Europe’s recession by offering rock-bottom rates.

His short-haul, low-cost airline recently launched inaugural flights from its Barbados base to Guyana, using two 149-seat MD-82 passenger jets.

Burns said the company has met all the requirements to operate in Jamaica and Trinidad and Tobago, two of the region’s largest countries, though Roger Williams, managing partner of Miami-based Airline Information, said Burns and REDjet have not helped themselves by aggressively advertising cheap fares to those islands before receiving approval to land there.

“I can empathize with their reasons for doing so, however it will not aid them in navigating the regulatory bureaucracy in the region,” Williams said. Aviation red tape “can be complex within the Caribbean and a very slow process.”

Nicole Hutchinson, spokeswoman for Jamaica’s civil aviation authority, said the country’s evaluation of an air service license is “highly objective and remains free from political or any other interference.” She declined to estimate how long a decision might take.

In Trinidad, Transport Minister Jack Warner has expressed indignation that REDjet was offering fares to his country before getting regulators’ approval.

“I am not against competition but I don’t think that competition should be based on a degree of lawlessness,” Warner said about REDjet in April.

Warner has since been suspended from his more high-profile post as vice president of soccer’s global governing body, FIFA, pending an inquiry into allegations of vote-buying in the organization’s leadership election.

Goverment-affiliated airlines have carried business travelers, tourists and goods across the geographically fragmented Caribbean, a region of small island nations dotted in wide expanses of water. But the carriers have been plagued by inefficiency, strikes and a lack of capital.

Antigua-based LIAT, Air Jamaica and Trinidad-based BWIA have reported millions of dollars in losses.

Last week, Caribbean Airlines, the Trinidad-based carrier which replaced BWIA in 2007, concluded its acquisition of Air Jamaica, which had racked up about $1.2 billion in debt.

Analysts agree with Burns that a low-fare alternative is needed.

“The Caribbean certainly needs to be stimulated as far as price; it is one of the highest priced airline markets in the world,” Williams said from Miami. “However, the Caribbean also needs reliable air service, something that its own airlines have failed to consistently deliver.”

Vaughn Cordle, managing partner for Washington, D.C.-based Airline Forecasts, said, “The glut of used aircraft and the high-fare environment makes it a good time for new upstarts to get off the ground.”

But he warned that “most fail because they are undercapitalized and cannot absorb the losses in the early stage of the life cycle.”

Burns says REDjet will succeed by cost-cutting: no free food or business class service, fast turnarounds at airports to save on parking fees, no overnighting by staff and use of Internet reservations to eliminate booking offices.

REDjet’s published fares would allow a round trip from Trinidad to Barbados with no checked baggage for $103.42, 66 percent cheaper than the least expensive flight from Caribbean Airlines.

The airline was founded in 2006 after Burns’ son, Robbie, worked in Jamaica for Digicel and was surprised at the price of flights. Burns said attempts to set up the company in Jamaica fizzled in 2007 and REDjet later moved on to Barbados, making it the only passenger line based there.

But that has created another problem for the company. REDjet announced on April 11 it had finally received permission to operate in Barbados. Just a day later, the U.S. Federal Aviation Administration said it had barred new Barbados-based carriers from flying to the U.S.

The FAA noted that Barbados was certifying an air carrier “with the goal of serving the United States,” but it said Barbados failed to meet international standards for oversight of airlines.

Anthony Archer, director of Barbados’ Civil Aviation Department, said that his agency is beefing up its staff. But it can take months or years to reverse such FAA rulings. A downgrade of Mexico last year was undone in a relatively short six months. Israel received a similar downgrade in 2008 and has not yet regained the top rating.

Aviation analysts agree that REDjet eventually will need U.S. flights, especially since it faces a relatively small, scattered local market.

“Even though discount airlines like Ryanair, and years ago Laker Airways and People Xpress, literally created new air travelers with ultra-low prices, they still tapped areas with high population densities. I would say that US rights are essential for REDjet’s long-term growth,” Williams said.

Burns said U.S. flights are not a priority at the moment: “Our fares and our structures are designed to make money” serving the Caribbean market.

Burns argues that Trinidad and Jamaica are breaching international aviation agreements by failing to approve REDjet’s operations.

“You can postpone this for a certain period of time, but you cannot stop it,” he said.

Associated Press writer Joan Lowy in Washington contributed to this report.

Source: The Associated Press.