>From today's Miami Herald: http://www.miami.com/mld/miamiherald/business/special_packages/business_monday/16347539.htm?template=contentModules/printstory.jsp Caribbean airlines struggle By JACQUELINE CHARLES jcharles@xxxxxxxxxxxxxxx Passengers traveling to and from Trinidad and Tobago on the Caribbean nation's flag carrier are no longer greeted by the famous steelpan and green and gold trademarks that have distinguished BWIA West Indies Airways. As of midnight Sunday, Trinidad-owned BWIA ceased to exist. It is being replaced by Caribbean Airlines, which was expected to see off its first flight at 4:20 a.m. from Port-of-Spain, Trinidad, to Georgetown, Guyana. The closure of BWIA follows years of financial turbulence and fuels mounting uncertainty about the Caribbean airline industry. Like U.S.-based carriers and others around the world, Caribbean airlines have been struggling amid soaring fuel prices, increasing competition and rising customer expectations for low fares. Also plaguing several government-owned operations, industry watchers say, have been a lack of investment and direction plus political interference. The result: bloated staffing, bad management and in some cases, airlines being run like air limo services for the rich, elite and politically connected. Still, in the tourist-dependent Caribbean where unemployment is high, national carriers play a vital role in employing citizens and linking small-island economies. Case in point: the Cricket World Cup. Tens of thousands of fans will rely on regional airlines to hop around the nine hosting countries. Richard Hanif, marketing officer for the Cricket organizing committee in Guyana, expects upward of 25,000 visitors when matches begin on March 28 in that nation. Yet these legacy airlines -- which are embedded in the national psyches of their respective nations -- are finding it harder to stay afloat as the region's popularity as a tourist destination grows and an increasing number of U.S.-based and European carriers fly in. Among the effects: ? Antigua-based LIAT is in merger talks with its main rival, privately owned Caribbean Star. Both regional carriers, which service the eastern Caribbean, have been in a vicious fare war that has resulted in losses for both. ? Air Jamaica is losing millions despite a restructuring plan. Noting that Air Jamaica lost $136 million in 2005, the International Monetary Fund recently told the Jamaican government it ``may need to reconsider the merits of maintaining a flag carrier.'' ? After repeated government bailouts, the bankrupt BWIA finally announced its shutdown, creating an outcry by Trinidadians and Barbadians over the loss of the carrier with a 66-year history and flawless safety record. The new Caribbean Airlines has already said it will be restructuring some routes to the United States and Europe. Bad management decisions and government interference were leading factors in BWIA's eventual demise, said former Trinidad and Tobago Ambassador Reginald Dumas, who spent years as his country's chief negotiator on air services agreements. For instance, when the oil-rich twin islands began an aggressive campaign a few years back to become the hub of the Free Trade Area of the Americas, the government ordered BWIA to start flying to Costa Rica. Suddenly, an airline that rarely had problems filling seats was now near-empty. ''You send planes to San Jose when it should be flying to London,'' said Dumas, referring to the airline's vital British market. ``The red ink grew.'' BWIA expects to suffer about $50 million in losses for 2006, spokeswoman Dionne Ligoure said on Friday. CEO'S VIEW ON BWIA Peter Davies, CEO of both BWIA and Caribbean Airlines, said a number of factors, including a failure to reach an agreement with the unions, led to his recommendation to the Trinidadian government that it close BWIA. Davies said his research indicated that while BWIA had loyal, almost passionate fans, the airline also had ``managed to upset over many years, through poor service and lack of on-time performance, many thousands of others to the point that almost, for every one passenger we were carrying, we had 10 or 15 who were extremely frustrated and said they would never fly on BWIA.'' In fact, BWIA's less than 60 percent punctuality rate -- the industry norm is 80 percent -- fueled the joke that BWIA (pronounced BeeWee) actually stood for ''Be Waiting in Airport'' or ``But Will It Arrive?'' ''Very poor. Poor. Poor. Poor,'' Trinidadian housewife Sophia Hosein, 27, said about BWIA's on-time performance even as she prepared to board a New York-bound BWIA flight out of Port-of-Spain a few days before Christmas. Still, Hosein chose BWIA when she traveled: ``I find the dates and the times convenient.'' In Trinidad, employees and union representatives accuse the government and Davies of approaching union negotiations in bad faith. Unions didn't oppose restructuring, said Clyde Weatherhead, an attorney for one of the unions who said he plans to go to court to have the unions reinstated. But ``the way in which they have gone about this is an attempt to have a union-free airline from January on.'' In Miami, BWIA's 40 U.S.-based employees were also upset that they were offered a less attractive severance package than their Trinidad counterparts. Contract workers replaced them. Davies, who refers to himself as the ''fix-it'' guy, said Caribbean Airlines' entire operation has been restructured and scaled back. There will be no unions, and the workforce has been cut from 1,800 to 650. ''BWIA was bloated,'' said Davies, noting that the airline had 220 workers per aircraft in its fleet, compared to British Airways, which has 120 workers per aircraft and Southwest, which averages between 80 and 85, he said. Direct flights out of Barbados and routes to Toronto and London have been cut out or reduced, competitive fares are in the works, and $5 million has been invested in wing tip extensions -- called winglets -- to allow the fleet of Boeing 737s to run more efficiently and save fuel costs. Most of the $359 million the Trinidadian government set aside for the new airline will go to pay BWIA's debt; some, Davies said, will go toward ``a careful marketing budget.'' Among the plans: alerts letting customers know they can book their flights using cellphones or in Internet cafés the airline hopes to open in Port-of-Spain. But with the Trinidadian government still owning the airline, some question whether Caribbean Airlines will eventually suffer the same fate as BWIA. ''If Caribbean stays lean and mean they have a chance, they have a niche perhaps,'' said consultant Michael Boyd, president of The Boyd Group, adding that the airline still faces stiff competition from American Airlines and other U.S.-based carriers. ``If they're just getting rid of bloat and waiting for the next [bloat] to come, it will just be BWIA phase two.'' ''I cannot figure out how they can so severely cut their routes through Barbados, and this has been one of their larger commercial destinations,'' said Ian Archer, a former Barbadian Permanent Secretary responsible for civil aviation. ``That doesn't make sense to me.'' Archer, also a former managing director for LIAT, is not surprised by the turbulence in the Caribbean airline industry. Caribbean governments have long been reluctant to make the tough decisions, he said. 'No government is popular if fares go up, especially when voters say, `You own the thing.' It was always a struggle,'' he said. LIAT/CARIBBEAN STAR Because LIAT and Caribbean Star run identical routes within five minutes of each other with the same fares, a merger makes good business sense, said Harold Lovell, Antigua's Minister of Tourism and Civil Aviation. Lovell said in 2005 LIAT lost an estimated $7.4 million. Between April 2004 and November 2006, the governments of Antigua and Barbados, two of the three major shareholders, pumped $22.4 million into LIAT to keep it afloat. Still, for the tourism industry, airline service is crucial. ''I cannot tell you if they fly Caribbean Star or LIAT, but it will hurt business if they were to go away. It would really have a negative impact,'' said Sharon Browne, a guest services agent at the 47-room Heritage Hotel in Antigua. LIAT LOYALTY Barry Joseph, owner of Barry's Café & Bakery on Long Street in Antigua, agreed. ''A lot of people -- Antiguans and others -- depend on LIAT and Caribbean Star,'' said Joseph, who travels LIAT every two months on business. LIAT's chairman, Jean Holder, noted the workforce has been cut to 750 workers from 1,000 a few years ago. ''We've been flying fare for fare, flight for flight with American Eagle, Caribbean Star, Caribbean Sun,'' Holder said. ``There is a great deal of competition in an area where costs are high and the margin of profits are low. Everything conspires to drive down fares.'' While critics have blamed many of the current woes on governments' quickness to support the airlines with blank checks, Holder said the issue is not government subsidy. ''An airline between an archipelago and a community is similar to a bridge. If a bridge falls down, do you spend days arguing about whether to restore it and the costs? Air transportation is an extraordinarily costly business,'' he said. But even he argues there does come a point when one has to stop throwing money at the problem and find a better solution. ''LIAT and Caribbean Star have taken a very bold step into the future,'' said Holder, who declined to provide details about the talks including the possibility of a name change, the fate of the unions and the new ownership structure. Privatization is not the answer to stemming losses, Holder and others say. BWIA, LIAT and Air Jamaica have all been privatized at some point. ''They've been owned by some of the most prestigious businessmen in the region and during those periods, they lost significant sums of money,'' Holder said. AIR JAMAICA After a decade of privatization, Air Jamaica in December 2004 returned to Jamaican government control. It then owed $560 million, $236 million to the government. Despite restructuring, the airline struggles. ''I really don't believe Jamaica needs an airline, nor can it afford it,'' said Aubyn Hill, a former member of the airline's restructuring management team. ``Taxpayers should not be paying for something that has lost money every single year, except for maybe one, since it was established.'' Air Jamaica officials did not return calls seeking comment, although a few weeks ago the government reiterated its commitment to the airline even amid headlines in the Jamaican press about a possible merger with the new Caribbean Airlines. But its challenges, and move to refocus on being a regional carrier, have raised bigger concerns about where the Caribbean airline industry is headed. ''We've had every possible thing that could happen to make airlines lose money happen in the past five years,'' said Holder, who remains optimistic nevertheless. ``If you really want to find something that is difficult and complex, try and run an airline.'' Miami Herald writer Jewel Fraser contributed to this report from Trinidad and Tobago and business writer Niala Boodhoo contributed from Miami. _________________________________________________________________ Experience the magic of the holidays. Talk to Santa on Messenger. http://clk.atdmt.com/MSN/go/msnnkwme0080000001msn/direct/01/?href=http://imagine-windowslive.com/minisites/santabot/default.aspx?locale=en-us