Trinidad’s government has bowed to unrelenting pressure from fellow Caribbean trade bloc countries and U.S. airlines like Delta and has now decided to remove generous subsidies on jet fuel that the oil- and gas-rich nation had been giving to its own national carrier, triggering cries of unfair competition from industry rivals.
Finance Minister Larry Howai told Parliament during the 2013-14 fiscal year budget presentation this week that the government would, beginning in October, drop the annual $500 million subsidy it was giving to Caribbean Airlines (CAL) to help it destroy competitors like Delta and Antigua-based commuter carrier LIAT.
The move comes a few weeks after a U.S. airline lobby group, Airlines for America (AAA), urged the U.S. Department of Transportation not to approve an application from CAL to operate direct flights to and from Georgetown, Guyana, citing excessive taxes, fees and the subsidy CAL was getting from its government despite objections from rivals.
Caribbean joint-venture airline Fly Jamaica Air, a relatively new carrier in the skies, is also a victim of the AAA objection, as it too wants to cash in on the lucrative New York-Georgetown route now completely dominated by CAL after Delta withdrew its service in May.
Delta gave no clear reason for the withdrawl despite its operating with load factors in excess of 80 percent, but industry insiders said it was livid at the CAL subsidy and decided to look inward rather than stay on the route.
Howai has now put all the bitterness against CAL behind Trinidad. He suggested that CAL had better be prepared to survive on its own and pointed out that the carrier is too big and important to be allowed to fail if its fortunes decline dramatically in the coming months.
“CAL today should be a company operating with a good cost structure, so the need for money from the state should not be an issue. In those circumstances, what it means [is that] once the subsidy comes out, then the airline should be able to pay for that from internal profits.
“At the end of the day, it really does not matter, because if the airline finds itself in difficulty, the state as the owner will have to put money in,” he told fellow legislators.
Majority-owned island-hopper LIAT had been railing against Trinidad on the subsidy issue, contending that it had brought the lifeline service close to closure.
St. Vincent Prime Minister Ralph Gonsalves said LIAT was being asked to pay up to $150 for a barrel of airplane fuel compared to $60 by CAL “on the same routes with me. That’s unacceptable, it’s wrong, it’s unlawful. And I have the facts and I have the law on my side with this one,” Gonsalves said recently.
Despite its dominance on many Caribbean routes like Trinidad-Jamaica, Guyana-U.S. and Suriname-U.S., CAL is still carrying debts way in excess of $100 million despite the fact that authorities had collapsed its predecessor company, BWIA, in 2007, cleared its debts and liabilities and started afresh.
