With new business plan BWIA eyes profits By Richard Cox BWIA West Indian Airways Ltd has a new ambitious business plan which aims=20 to re-fashion the carrier into a low-cost, competitive enterprise, and=20 return it to profitability in 2003 with an anticipated net income of $30.67= =20 million. =93BWIA will reinvent itself to meet its much more competitive=20 low-cost-low fare environment,=94 the business plan says. The regional=20 carrier is looking at a business model along lines of the hugely=20 successful, low cost carriers in the United States such as Jet Blue and=20 Southwest Airlines, though its international competitors for the Caribbean= =20 market are the larger American Airlines and US Airways, British Airways and= =20 Air Canada. Within the region, BWIA says it has encountered strong rivalry= =20 from Caribbean Star, which has been =93increasing capacity and lowering= fares=20 seemingly beyond economic rationale=94. This optimism comes at a time when= =20 the International Air Transportation Association (IATA) is predicting an=20 additional US$10 billion loss for global airlines this year because of an=20 uncertain international economy and war in the Middle East. Last week, Air= =20 Jamaica asked Government to take a bigger stake in the airline, in a=20 debt-to-equity swap that would up the State=92s share of the national= carrier=20 to 45 per cent. Also, four regional governments, including T&T, brokered a= =20 plan to pull Liat, which is 29 per cent owned by BWIA, out of its deep=20 financial hole. BWIA, however, believes that restructuring its operations=20 can realise its objective on projected revenues this year of $1.605 billion= =20 and achieve an earnings per share (EPS) of 60 cents. =93Assuming an eight=20 times multiple, this could translate to a share price of US$0.80 ($4.96) by= =20 the end of fiscal 2003. This could set the basis for regaining the issue=20 price of US$1.25 ($7.75) in the following year,=94 the airline believes. = The=20 financial report for 2002 show that the regional carrier incurred a loss of= =20 $76.37 million on revenues of $1.589 billion. Losses for the airline in=20 2002 were even greater when aircraft-related one-time write-offs were=20 included to bring the total deficit in the region of $180.9 million. =93With a smaller market and more competition prices have dropped. To hold= =20 its own, BWIA has had to match these lower prices. It has managed to limit= =20 volume losses, but revenue yields have suffered substantially,=94 says the= =20 airline whose 2002 revenue declined by about $135.2 million. The business=20 plan focuses on three areas of the airline=92s operations that are the=20 largest source of annual expenditure =96 employee costs ($342.4 million);=20 aircraft rental ($252.27 million) and fuel ($212.84 million) that account=20 for 50 per cent of all its expenses. There will be drastic major strategic= =20 operational, maintenance and human resource cost-saving measures to redress= =20 the imbalance between costs and revenue and the impact caused by higher=20 insurance charges and fuel price increases. Standard & Poor=92s last week=20 underscored the continued risk of higher jet fuel prices despite recent=20 easing. BWIA, however, is considering approaching the Trinidad Government=20 about guaranteeing a fixed price for fuel. =93Economic recovery is not=20 expected for another 18 to 24 months with the low-cost, low-fare market=20 continuing to depress revenues,=94 the airline says. One objective is to=20 achieve an operating cost per seat mile eight US cents which the airline=20 believe will put it in a strong position vis a vis American Airlines and=20 other competitors. There will also be a modification of the operating=20 schedule using nine aircraft instead of the current 13 units at the same=20 time increasing aircraft use to 12.27 hours per day from the existing 9.53.= =20 As well, computer reservation costs are considered too high and a $31=20 service fee is being assessed to offset this expenditure, with the long- to= =20 medium-term objective being to renegotiate the costs downward with vendors= =20 such as Sabre, Galileo and Amadeus. The intention is to reduce the airline=92s financial outlay by about $97.03= =20 million over the next year touching on aspects of the carrier=92s operations= =20 reservations, duty free concessions, management reductions, outsourcing of= =20 major airline repairs, ramp operations and general staff reductions. It is= =20 also looking at means to increase its load factor, presently at 58.93 per=20 cent, to 64.6 per cent in 2004 if it is to be competitive with the industry= =20 leaders such as American Airlines. Since the September 11, 2001, incident,= =20 the airline reduced its staff of 2,500 by 101 and subsequently letters have= =20 been sent to 617 staff members informing them of their redundancy. Its=20 intention is to reduce costs by seven per cent per month or by $8.76=20 million and the airline says it is in need of a financial subsidy of=20 $157.75 million in addition to the $81 million loan already committed by=20 the Trinidad and Tobago Government. =93In 2004,=94 the airline says, =93BWIA= =20 should be in a position to restart its growth plans and place stronger=20 emphasis on revenue generation and new/additional services.=94 In the major= =20 markets such as Florida, New York, Toronto and perhaps Boston and=20 Washington, there will be additional flights to increase market share and=20 expand revenues in the 2004 financial year. *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Site of the Week: http://www.thehummingbirdonline.com TnT Webdirectory: http://search.co.tt *********************************************************