I am going out on a limb for this weeks blog and swerving away from my usually industry and airport analysis. I have been contemplating writing a business plan for a of a low-cost airline in the Caribbean. What business do I have trying to create my own airline? In truth, not much? I have worked in aviation and travel but never directly for an airline. Lets just say if I ever get my MBA, the lack of competition in the Caribbean commercial airline market might be my thesis. My idea for a low-cost airline in the Caribbean isn’t new but to date there has been no successful attempt due to a very difficult operating environment. Could I be the first?
If you have ever flown inter island in the Caribbean, you know it’s not cheap. Being a former resident of the US Virgin Island, I know this fact all to well. There are several factors that play into the cost of tickets, but to me the biggest is competition. There is no competition threatening the big dogs like LIAT,Caribbean Airways and Air Jamaica. But we must dig deeper into why there isn’t any competition. All three of those airlines are owned by different Caribbean governments. Caribbean Airways and Air Jamaica are both held by Caribbean Airlines Limited which is owned by Trinidad and Tobago. LIAT is owned by 7 different island governments. It’s tough to fight the government, just think of that last parking ticket you fought. Did you win? Ya, I didn’t think so.
These governments restrict competition because of course it will negatively affect tickets sales. If they remove the competition and as long as demand remains high, they can keep prices high. Also, they control flag carrier status and they can grant permission or more importantly deny permission of any airline to land in their country. The regulations are what is preventing real competition and without and open skies agreement it will be nearly impossible to run a low-cost private airline in the Caribbean.
A sad truth is that airlines like LIAT don’t even care if they turn a profit. They have recorded losses of up to $40 million in a year. Their operations are spotty with poor on time records, poor customer service and older aircraft which are paid for but they won’t reinvest the money in new aircraft. This type of airline can only function in a rigged situation or if you don’t care about making money, which in this instance both factors seem to be true.
My idea is to write a mock business plan for a low-cost Caribbean carrier. As I don’t believe there will be any open skies agreement in the near future you have to involve a government body. If you can’t beat them, join them, but only a little. As I am an American citizen and former Virgin Islands resident, I would choose to base my airline in St. Thomas and include the VI government. STT has a fully functional airport and deals with large and small carriers on a year round basis. Using STT as a hub would also increase revenue at the airport as most flights would connect or terminate in STT. Aircraft size would range from 50-70 seats and the destination number would be small to start. You would need San Juan and Santo Domingo for sure and then down island hopefully to St. Lucia, St. Maarten and Barbados. A codeshare with a mainland US domestic carrier would also be crucial. Then there is the issue of financing. Well I am sorry to tell you, I don’t have a clue where I would get the money, yet.
As Cyril E. King is small to mid size airport, you might have potential candidates that have previously worked for other airlines to pick from. Promote the airline as the hometown airline of the VI and create pride for the people associated with the airline. Show how beneficial it will be for people to have cost-effective airfare and increased inter island commerce. Position the airline to be an ambassador of the island community and focus on home-grown job creation.
So that’s my plan, well the bare bones of it. I know, there are a million points that still would need to be addressed like training, software, pricing models, etc. But if the idea is clear it needs to be put on paper. I better get to it this might take a while. I see lots of cups of coffee in my future.