Time to Re-examine the Bahamasair Business Model? 5 ATR's and 3 B737-500 and $20M a year Subsidy? Time for Privatization no?

By NEIL HARTNELL - Tribune 242 Business Editor- December 31, 2018

Tomas's Comment:

Beings so close to the Florida cannot be easy for Bahamasair when there is so much competition just to the West from Miami, Dt. Lauderdale, Orlando, etc.

The market has changed since Bahamasair was formed, today, there are several local regional airlines that can cover the The Bahamas, from Western Air (Saab 340B, ERJ-145), Sky Bahamas (Saab 340), Pineapple (SD360, Be1900C), Southern Air (Be1900C, Flamingo (C99/B99).

Time for the Government to get out of the domestic market? for sure, why use taxpayers money to compete with local airlines? get out.

All state owned carriers in the Caribbean are cash burners, and billions have gone into keeping these state airlines afloat since the 1970's, LIAT, Caribbean Airlines (ex-BWIA), Cayman Airways, SLM (Surinam Airways), only Air Jamaica is gone, and guess what? market forces took over the Jamaican market, and sadly Air Jamaica is not missed for its capacity with Jetblue, Southwest, American, United, Air Canada, Westjet, etc all taking over ex-Air Jamaica routes.

The fact is, ALL of those state airlines can be replaced, the argument they are 'strategic' no longer applies, air transport has grown in North and South America, when there is a vacuum in the market, you can bet competitors will fill it, if the demand warrants it.

NO place for state owned airlines anywhere in the world today, we saw that with the past failures in Europe, Swissair, Sabena, Malev, Cyprus Airways, all failed and in no time, the routes were filled by other airlines new and old.

State airlines distort competition, how can any private airline today in the Caribbean compete say in Suriname, Guyana, Eastern Caribbean, Trinidad & Tobago against SLM, CAL, LIAT? they can't and only the foreign airlines can, but limited by BASA (bilateral air service agreements), which cap aircraft size, frequency as not to harm the local carrier?

Open up the market market to the likes of Spirit, Frontier, Jetblue and the local state airlines are in trouble, we see now American flying to Georgetown, Guyana, from Miami, Jetblue will fly from New York, bad news for start-up for Guyana Airways II, and within 2 years watch US airlines eyeing next door Paramaribo, and then its lights out for local SLM.

Bad for the local airlines, good for local consumers, tourism and economic development.

THE END of state ownership of airlines is good news, it holds back economic development that comes from air transport liberalization, just look at the European aviation growth the past 20 years, and all the new airlines and all the failures of the weak and those that just could not adapt to change.

The interest of the Government should be keeping links with strategic cities in the US, like Cayman Airways, and even that is really not needed, as US carriers can provide the capacity and frequencies today needed by local city pairs.

In short, time to privatize the the Bahamasair, and let market forces do the job, a local operator can take over the 5 ATR-42/72-600's and find a way of making them profitable, the 3 x B737-500's need to go, uneconomical anyway, and a waste of taxpayers money to try and replace them with new B737Max or A320neo, let the existing North American airlines do what they do best, and let local Bahamian operators do what they do best, domestic routes and flights into Florida and Cuba.

The $+20 million a year used to subsidize Bahamasair can be better used elsewhere, no?

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Bamasair’s “vexing business model” was yesterday blamed for the airline’s latest troubles that resulted in 17 passengers - and virtually all bags - being thrown off a flight to Marsh Harbour.

#Dionisio D’Aguilar, minister of tourism and aviation, last night told Tribune Business that the national flag carrier had “no choice” but to take such action after an electrical malfunction meant it was unsafe for the plane to depart West Palm Beach with a full passenger and baggage load.

Route Map, now includes Chicago and Houston and soon a B737-700 is to join the fleet.

#He warned that Bahamasair’s “lack of scale”, with a fleet featuring just eight planes, meant “customer service disasters” such as those that have occurred repeatedly over the Christmas period are bound to “persist” with no good options available for resolving them.

#Arguing that the choices were the same as those confronting the Bahamian people since the airline’s founding in 1974, Mr D’Aguilar said the Government could either “go all in” and pour more money into the loss-making carrier by acquiring more planes, “maintain the status quo” or seek to sell/privatise it.

#He reiterated, though, that Bahamasair was not prepared to compromise its “impeccable safety record” over issues such as those affecting yesterday’s West Palm Beach to Marsh Harbour flight, adding that it was better to arrive “eventually” than not at all.

#One passenger on the flight, speaking on condition of anonymity, told this newspaper that the episode represented a “black eye” for The Bahamas and its reputation as a leading tourism destination given that it impacted numerous visitors - many with young children - who were travelling to Abaco for the New Year.

#They added that the West Palm Beach Sheriff’s Department was called to maintain order amid fears that tempers among frustrated passengers would boil over and “spark a riot” at the gates.

#“There’s complete chaos in West Palm Beach,” they told Tribune Business. “Bahamasair just announced that they will not be able to take any bags on this flight and they are now looking for 18 volunteers to fly tomorrow.

#“There’s a few irate tourists. They called for the Sheriff’s Department because they were scared there was going to be a riot at the gates. They’d checked everybody in, and then said they needed 18 volunteers who would not be going today; they’ll be going tomorrow.

#“Total embarrassment. It’s a black eye for The Bahamas. There’s an awful lot of people with young children. You can’t get a straight answer from anybody as to what’s going on. They said the Federal Aviation Administration (FAA) has imposed weight restrictions on the aircraft.”

#The source said persons who volunteered not to travel on yesterday’s flight were offered around $200 compensation, which they described as “not a lot of money”. Due to take off at 12.20pm, it eventually departed West Palm Beach around two hours’ later.

#Speaking after arriving in Marsh Harbour, minus their bags which remain in Florida, they added: “What comes out of all this is a black eye for tourism. We’ve just been awarded the top destination of 2018, and then Bahamasair goes and messes it up.

#“I don’t know why we’re so tolerant of this thing. It loses millions of dollars every year. They said check back tomorrow and see if we have any bags. A lot of tourists were coming over for New Year, some of them with very young infants, and they have no bags. It’s the tourists I felt badly for.

#“Bahamasair, in one fell swoop, goes and destroys it all. Somebody has got to do something with that airline. It loses $20m a year. Privatise it.” Tribune Business was told that the bags which failed to make yesterday’s flight are being trucked to Miami for transport to Nassau, from where they will be flown to Marsh Harbour tomorrow.

#Mr D’Aguilar last night explained that the West Palm Beach problems stemmed from a malfunctioning generator on the 72-seater ATR aircraft operating the route. The plane’s manufacturer advised Bahamasair that while it could still fly, it could only do so if its weight was restricted.

#“They had to reduce the number of passengers by 17,” the Minister confirmed. “It’s a 72-seat plane, and the manufacturer suggested going to 51 passengers and eight bags. They had to leave 17 passengers and 60 bags.

#“Bahamasair obviously had no choice. The part malfunctioned, and in the interests of safety they had to follow the manufacturer’s guidance as painful as it is. Bahamasair has an impeccable safety record that it’s not going to compromise. It’s better to get you there eventually than not at all.”

#Mr D’Aguilar said Bahamasair’s small fleet size, with a maximum of eight planes currently available to it, meant it was virtually impossible to switch aircraft between routes if one malfunctioned or was taken out of service for scheduled maintenance.

#Warning that the problems experienced by the national flag carrier yesterday and over Christmas will reoccur at future intervals, Mr D’Aguilar said the Government faced the dilemma of throwing good money after bad - given its persistent $15-$20m annual losses - in acquiring new aircraft, maintaining the current situation or potential outsourcing/privatisation.

#“This is what happens when you are an airline operating with eight planes and experience a technical malfunction,” he told Tribune Business. “Bahamasair is a small regional operator with eight planes, and when you suffer the loss of a plane due to mechanical issues it creates major, major issues.

#“It’s not like American Airlines where they have 600-700 planes, and can switch one over. With a small regional company this is going to happen. With the business model under which Bahamasair operates right now, these types of problem are going to arise. It’s unfortunate they’ve arisen over the Christmas season, but when you lose a plane this is what happens.”

#Mr D’Aguilar added that Bahamasair has a total seat capacity of 630, split between the three 120-seat B737-500 jets; two 72-seat ATR-72-600's and three ATR-42-600's. “This is a vexing business model,” he reiterated.

#“It’s very hard. From the revenue standpoint you want to maximise use of your aircraft, but that leads to customer service issues for if you lose one plane you have to scramble for another. This is not an easy fix. As a businessman, this is a difficult business model to resolve, and these problems are going to arise.

#“These problems will persist in the business model of Bahamasair. You’ve got a business with eight planes. It’s like Superwash with eight washers. You need to create scale, and Bahamasair does not have it. Every time you lose a plane you have these customer service disasters,” Mr D’Aguilar continued.

#“The business model is flawed. To address it, you can go all in, get a heap more aircraft and simply throw money at it or you maintain the status quo. It’s a question the Bahamian people have to ask: Do we spend more money, buy more planes and invest in Bahamasair, or do we align with other companies.”