CAL fuel subsidy removal could see competition on the GT/NY route?

Sep 12, 2013 News

The pull out and failure of airlines on the Guyana/ New York route has been blamed partially on the unfair advantage Trinidadian air carrier, Caribbean Airlines enjoyed as a result of an annual multi-million dollar fuel subsidy from its government.
American based carrier, Delta Airlines and Caribbean carrier, LIAT, among others, had argued about the difficulty they faced as a result of the subsidy, even calling the advantage unlawful. Recently, Airlines for America (A4A) which bears concerns for American based airlines, expressed worry over CAL operating the Georgetown/New York route; asking the US Department of Transportation (DOT) not to grant permission for CAL to operate directly out of Guyana.
Now that this subsidy will be removed by October 1, as the Trinidad Government announced during its budget presentation Monday, the big question is, what does the future hold for Guyana without CAL‘s fuel subsidy?
Aviation veterans say that several changes may occur. Some view a level playfield in terms of fuel acquisition, while others say that airlines such as new comer Fly Jamaica, would have a better shot competing on the GT/NY route, with space being left for other airlines to enter the very lucrative CAL dominated route.
It was even stated that this move by the Trinidad Government could give A4A one less contention about direct flights out of Guyana. On the other hand, worry is increasing over a possible hike in ticket prices; “a reality that Guyanese know all too well.”
Retired Director of Civil Aviation (ag) Aubrey Alexander, told Kaieteur News yesterday that the removal of CAL’s fuel subsidy could mean several things, but one which is clear is that the A4A will have one less thing to complain about. The representative for American based airlines was concerned about the unfair advantage CAL would have on the route as a result of the fuel subsidy.
With this gone, Alexander said A4A is left to argue about registered carriers operating direct flights out of other CARICOM nations; and this is the main hindrance for Fly Jamaica.
According to a consensus tabled by Jamaican ICAO Council Geoff Morris, during the International Civil Aviation 23rd General Assembly in Montreal 1979, Alexander said it was endorsed that the exercise of route and air transport in developing states having a community of interest allowed for carriers registered in a developing nation to operate directly out of another developing nation as a means of promoting regional development.
As it relates to increased ticket prices, Alexander said it might not be that alarming since other carriers are operating without fuel subsidies. He noted that the airline’s profit margin could decline, but “yield management’ which is commonly practised by other airlines would aid in optimizing profitability.
Active aviation officials say it is too early to say before an analysis, what the future holds for Guyana following the fuel subsidy removal. It was however stated that the prospects of increased competition in Guyana are looking up and this would give Guyanese travelers better flying options.
Delta had stated before its pull out earlier this year that it was losing revenue and some contended that it was a result of the fuel subsidy that several other airlines had been complaining about. Prime Minister Dr. Ralph Gonsalves, Chair of LIAT’s shareholder governments, told reporters in Kingstown in July that he was bent on resolving the subsidy issue as it related to LIAT.
LIAT had argued that CAL’s subsidy was illegal and during talks between LIAT and CAL, neither side budged in its positions. Gonsalves was even quoted as saying in the Jamaican media that “I am of this view that this matter (CAL fuel subsidy) is going to be resolved only through arbitration and or the Caribbean Court of Justice. I don’t think that Trinidad and Tobago would want to settle this matter.”
Gonsalves had dubbed as unacceptable, wrongful and unlawful, LIAT paying $130 to $150 U.S. a barrel for fuel and CAL paying between $50 to $60 US a barrel while working same routes. Trinidad Finance Minister Larry Howai has stated however that there will be no impact on ticket prices.
He added, “The debt-ridden State airline must move towards the adoption of a financially-sound business model for positioning the airline in targeted segments of the global tourism market.”

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CAL fuel subsidy removal could see competition on the GT/NY route?

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