BBC Caribbean reporter Tony Fraser gives an analysis of the situation facing regional airlines in the wake of losses resulting from escalating oil prices. There is bad news for the international airline industry: The projection is for a $5bn loss on operations during 2004 and this is notwithstanding a 17.7% increase in the number of passengers travelling during the first nine months of the year. The anticipated losses result from escalating oil prices over the first 10 months of the year and with no expected swift softening to the $50 per barrel prices, airlines are in for some "turbulence up ahead". The figures came from vice president of the International Air Transport Association (IATA) for Latin America and the Caribbean, Patricio Sepulveda, at this week's Regional Assembly of Airports Authorities of Latin America and the Caribbean. The news is even more distressing for the 90 airlines operating in Latin America and the Caribbean: 85% of those airlines have had major losses; and, according to the IATA vice president, many of the airlines still flying the southern hemisphere are bankrupt. For Latin America and the Caribbean the projected losses for 2005 follow from the $2.7bn lost between September 2001 and 2003. With fewer aircraft and far smaller general-operations infrastructure, the 90 airline companies of Latin America and the Caribbean do not have scale as a mitigating factor to counter the higher costs of operations. Private ownership as opposed to the state-owned model has made little difference, the best example being the two major airlines of the Caribbean: BWIA and Air Jamaica. The Trinidad and Tobago population has witnessed several US multi-million dollar government "bailouts" of BWIA. During the 10 years of private ownership, Air Jamaica has lost US$530m. LIAT is on financial death row and the half-dozen or more national airlines around the region are all losing tens of millions of dollars. Apart from the economics of airline bankruptcy, there must be an increasing margin for aircraft failure in circumstances in which sufficient finances may not exist to adequately maintain aircraft; to change airplanes that have gone beyond the safe flying period; and to do the regular upgrades necessary to stay in the air. Airlines vital Airline transportation has become central to business, politics, social life, sport; it would be difficult to find one aspect of international life and play - and this notwithstanding the advance in telecommunications to produce virtual interconnectivity, not dependent in some way on international air transport. The deep problems facing the international airline industry are going to challenge, even further, the need for Caricom countries to prevent further decline in their market share of the tourism industry in the Caribbean compared with the growth being experienced by the Hispanic Caribbean. A couple of years ago when several countries in the Eastern Caribbean experienced the shock of a number of international carriers saying the route was not profitable and that they would require all kinds of subsidies to return, we had a front seat view of what can happen to tourism economies and societies without assured international airlift. It is certain that airlines are going to make economic and financial decisions about what they have to do to cut losses when they face bottom-line results of operations for 2004. Sepulveda says IATA is asking fuel suppliers to take a cut on their profit margins on aviation fuel as a means of tiding the airlines through this period. That apart, the IATA officials are saying to governments: lower landing and handling fees airlines have to pay to airport authorities. Sepulveda says governments need to see airports and airlines as providing services that contribute to economic activity such as tourism and trade and therefore treat the airlines and airports as a public service contribution to growth and development in the wider economy. At the same time, the Latin American and Caribbean Airports Association is urging governments to supply soft loans and various other kinds of concessionary financing to upgrade security at airports and modernise the general facilities. In Trinidad and Tobago, transport minister Franklin Khan is sure landing fees and departure taxes paid by the public and airlines at Piarco are far too low and in need of review. He has sufficient political savvy to understand that increasing departure taxes has political risks while a hike in airport handling charges could make Piarco uncompetitive and unattractive for all forms of travel. Even so, the Trinidad and Tobago transport minister says his government views the airport as being strategic to the development of other parts of the economy. For this reason, the government has not allowed BWIA to die because of its importance in opening up new trade routes to Central and presumably South America. He says privatization is not an option at this time. Airport investment Jamaica, without pretensions to being able to finance airport development and subsidise international airlines flying visitors to the North Coast, has privatized the operations of Montego Bay and is planning to do the same with the Norman Manley Airport in Kingston. How are the V.C. Bird, Joshua, Canefield, Vigie and other small airports in Caricom going to deal with this new challenge is anybody’s guess; it is probably out of the question however that the governments will find money to modernise the airports. A natural follow through question would be whether these airports are attractive enough for private investment. Before Caricom countries can even contemplate subsidizing international airlines, even if they are bringing tourists to their shores, they must certainly end this nonsense of all these several bits and pieces of an airline losing tens of millions of US dollars annually. Three years ago Bahamian Prime Minister, Perry Christie, made a logical and passionate appeal to his colleagues to rationalise air transport in the region. Of course nothing substantial has been done since then. The call came at a time when the governments of Trinidad and Tobago and the other shareholder governments of LIAT started talking about shaping the makings of a regional carrier out of LIAT and BWIA. More talk; more consultants and reports; new deadlines have gone and still nothing has emerged. Maybe BWIA, Air Jamaica, Bahamasair have to be firmly grounded before something is attempted. Perhaps when the reality of the end-of-the-year losses hit home, a new commitment to action will emerge. A version of this story has previously appeared in the Trinidad Guardian. SOURCE: BBCCARIBBEAN.COM