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FLYING HIGH!
The government will never get back into the airline business. It cannot.
It has been pursuing an economic model and has benefited from debt relief and concessionary loans on the basis of increased liberalization. A number of State enterprises have been privatized and right now government is divesting itself of properties it owns. It will not get back into establishing any new corporation, much less one that is as financially tenuous as the airline business.
The talk about examining reentering this industry is merely part of the negotiating tactic to force Caribbean Airlines to lower its rates. Caribbean Airlines is however not that gullible. The company is not going to be worried about any threat of competition.
Caribbean Airlines has faced such competition before on its Guyana leg and has prevailed. Others have come and gone and the rates have remained high. Caribbean Airlines knows that there are attendant risks involved in the government of Guyana getting back into the airline business and they know that this is not going to happen. So they are not likely to be worried.
Licencing new carriers in Guyana has never brought down airfares in a sustained way. In fact, the fares have tended to settle at an equilibrium point that more or less translated to what existed before.
Airlines are not always assured of making money. In fact, many airlines have gone broke both during recession and out of recession. Air Jamaica is right now in serious problems, and a few years ago the Trinidad government had to intervene to save BWIA, which they have rebranded as Caribbean Airlines.
Guyana Airways was forced to privatize because the State could no longer support its losses. And it left such a huge debt to its new owners that they also went belly under. Other carriers have come and gone and still airfares are high.
One of the mistakes that have often been made by the government in licencing new carriers is that they have underestimated the risks these carriers carry when travelling to and from Guyana.
And because of this, the assumption has always been that increased competition will drive down rates. It may have if the industry was not as volatile. However given the fortunes (or rather lack of it) in the airline industry, competition has not allowed for the lowering of prices and this is not likely to happen given the still relatively high oil prices.
A few weeks ago the government complained about the high prices being charged by Caribbean Airlines. One newscast even reported that the government was going to ask questions of Caribbean Airlines as to why they removed one of their local managers. What business it is of the government to question the internal working of a company is beyond comprehension bit if the matter was indeed raised, Caribbean Airlines would have been quite in order to inform the government to keep out of the internal business of the company.
There is no way that the government of Guyana can force Caribbean Airlines to revise its fare structure unless the airline believes that unless it does so it will lose business. And the record of introducing new competition has never forced prices down.
The start-up costs of a new airline are prohibitive, even if all that is being entered into is leasing an aircraft and selling tickets.
These start-up costs will therefore not likely force any competition in fares and thus it would be even more difficult for the government to convince the donor community to permit it to re-enter the industry.
What ought to have happened was that when the government was licencing other carriers to travel to and from Guyana, it should have insisted as a condition of any licence on a formula at setting fares that would allow the public to benefit from cheaper fares when fuel prices dipped and during off-peak season.
This was never done and therefore we have to face the consequences of our failures.
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