//
you're reading...
Airline Management, Regional Aircraft, Regional Airlines, State Owned Airlines, UPDATES

SUMMARY: The Caribbean is a “graveyard” for airlines over 40 in the past 30 years, with 6 government owned airlines still flying and still burning taxpayers money, destined to never make money because they never change, till now. Cayman Airways, owned by the British Overseas Territory of the Cayman Islands has been changing quietly for years, reducing its debt, modernizing its fleet with 4 x B737-8 (Max8’s), but still dependent on $20+M per year from the government. A new modern fleet will help reduce operating costs but lease rates will be 6 times more than the B737-300’s, and new routes like the latest to Roatan, Hondurans are a good sign of expansion. It is at least a change, the other 5 government owned airlines are ‘business as usual’, politicians sticking their noses into everything they don’t understand, no new initiatives, no new strategy, no new leadership, just sitting around their desks “doing the same things over and over again expecting different results” (Einstein’s definition of insanity) and it applies so well to these 5 perpetual money losers. Only radical change will bring about a brighter future for Government owned Caribbean airlines, its time for surgery to revive them or its time for euthanasia, and cut off their life support (aka taxpayers money) ? one or the other, but things cannot keep going on usual, at some point creditors will have had enough, and then its THE END.

I have written about the Caribbean airline fiasco for years, you can read previous Blog articles on LIAT, Surinam Airways, InselAir, etc.by clicking on State Owned Airlines (under Categories)

For many years I have written about the plight of Caribbean airlines, and the infamous region I call a “graveyard” for airlines.

Yes, the list of many failed airlines is very long from BWIA (photo below), Air Jamaica (photo below), ALM, DAE, Air BVI (photo below), Carib Aviation (photo below), VISS, Helenair, Guyana Airways, Tiara, Cardinal, Eagle, RedJet (photo below), Caribbean Star plus 30+ other airlines.

The few airlines that are around 30+ years are the 6 government owned airlines and all big money losers, Bahamasair, Cayman Airways, LIAT, Caribbean Airlines, Surinam Airlines and Winair (photos of all 6 below). Political interference in these airlines is killing them and burning millions of dollars in taxpayers cash annually.

Those private airlines that are still around 10+ years of any size, are even fewer with SVG Air and Mustique Airways in St. Vincent & the Grenadines to Sky Bahamas and Western Air in the Bahamas to inter-Caribbean in the Turks & Caicos, and Gum Air (Suriname).

Lots of airline start-ups planned over the past 2 years, Blue Sky (Cayman Islands), AVA Air (Martinique), AVA Airways (Dominican Republic), KnightFlight Airways (Jamaica), SXM Airways (St. Maarten), TIA 2000 (Barbados/St. Lucia), Fly Always (Suriname)-photo below, Air Guyana (Guyana), BVI Airways (BVI)-photo below.

Many of the above have not started yet, few have, and most of those that will start will fail within 3 years, why ? poor management, which comes down to leadership and vision, experience, strategy, business plan, marketing, sales, finances, planning, brand to distribution. Too many times its scene as a “sexy” business, but many venture into it without really understand the business side.

As an airline consultant, adviser and executive, I have worked with and for 45+ airlines, and pretty much seen it all, the good and the ugly on 4 continents and 20+ countries, I can see success and I can smell a disaster in the making, comes with years of experience I guess.

It is why I am writing today about something positive in the Caribbean airline scene, the slow but steady progress Cayman Airways (IATA: KX) is making under the ownership of the British Overseas Territory of Cayman Islands.

The airline current operates 4 x B737-300’s, 1 x B737-800 and 2 x Saab 340B’s, with 4 x B737-8 (Max8’s) on order from ALC for 2018-2020, and will replace the 300’s, with one 800 on lease to cover till the Max8 dleiveries begin. The Saab 340B’s replaced the DHC-6 Twin Otters on flights to Cayman Brac and Little Cayman, and will do some regional flying as well.

Surinam Airways operates 3 x B737-300 as well, but the foolishly think down gauging to 100 seat Embraer E190’s is the way to go, but with 70% LF on the 300’s with 126 seats (88 pax) why ? God only knows, this is the stuff that drives me crazy, but it i their funeral, but I hate to see any operation with lots of potential not reaching its best, like a gifted child that is under performing.

Formed in 1968 and government owned since 1977, KX was like most Caribbean government owned airlines, on its knees in 2009, with $48.4M in debt and losing millions every year, and at the time it had accumulated $51M in loses due to “chronic under-funding” by the Government over many years, forcing the airline to make find some “creative” ways to get by, “in some cases they used informal borrowing”, no explanation given ? hmmm.

In short KX was a drain on taxpayers and another ‘technically’ bankrupt Caribbean airline, and the income statement and balance sheet had to be improved somehow.

Unlike, the Board at LIAT for instance, the KX Board decided to make changes, as KX was and is an important strategic asset for Cayman Islands tourism and business development.

The Board decided to start paying off its $48.4M debt, by $5.1M per year in 2010 so that by the end of 2020 the airline would be debt free ! wow ! a Caribbean airline actually making real change to lower its debt and improve its bottom line in due course.

Here we are in 2017, and Cayman Airways debt is around $17M (was $19M in Sep/2016). The airline has paid off $31.4M since 2010, now that is praiseworthy, but still the airline depends on $+20M per year from the government, that is $346 per resident (population of 57,700).

That is a huge amount for a small territory that needs air access and air connectivity, and wants to control it to a degree, and not be dependent on DL, AA, UA and others, it learned over the years US airlines will pull out whenever they see fit.

The current CEO Fabian Whorms is working hard to improve KX financially, and the new MAX8’s will help, they have 20% better fuel efficiency than the 300’s and 40 more seats and much greater range. They also allow KX to tank up with cheaper US fuel for return flights as fuel on the island is expensive as it must be shipped in.

The new Max8’s will also allow, what I have been pushing for in the Caribbean, and that is non-stop flights to the US West Coast, a new market where people are more used to Hawaii and Mexico than the Caribbean.

Now KX receives $2.6M per year between Grand Cayman and Cayman Brac and Little Cayman with the Saab 340B’s, always a money losing route with DHC-6 Twin Otters, which if done right should not be a money loser for such short hops, hmmm.

Then $13.8M of Government money goes to KX for “strategic US and regional gateways” which are key tourism markets, while the Government reduces its payments for international flights by $1.4M, which I assume is MSA (marketing support agreements) which are fund to airlines for marketing your destination and MRG (minimum revenue guarantees) that governments give as future contracts to attract airlines to provide regular scheduled services to your island.

Cayman Airways has launched a new route to Roatan, Honduras (yes, the highest murder rate nation in the world), but safe on Roatan ? the twice weekly service is a fantastic ‘dual destination’ strategy, offering tourist 2 destinations in 2 different countries , this “split’ vacation idea is very interesting and lots of interest from tour operators and tourists like Cuba-Jamaica, Dominican Republic-Haiti or Puerto Rico, etc.

More of this dual destination needs to be done, good for airlines and in this case KX, as it will be able to pick transfer Roatan passengers through its hub at CGM (Owne Roberts International Airport) to US destinations like NY, MIA and ORL, plus Havana and Kingston. I love it, the Caribbean airlines need to cooperate more, one reason they are losing money, and cooperating could work both ways very well.

Lastly, KX is undertaking regular charter flights between Grand Cayman and St. Maarten for Health City Cayman Islands and St. Maarten SZV Social and Health Insurances, flying up to 20 patients as needed with a technical stop in Kingston, Jamaica. Another example of things that can be done when islands cooperate, but they don’t its too much politics and the losers in it are the good people of the Caribbean, having expensive air fares, tax money to lousy state airlines and poor service.

Blame the politicians, don’t like them, vote them out, many need the boot ! otherwise nothing will change.

Till next time cheers.

Advertisements

About Aviation Doctor - Helping aviation companies to transform the present into a more profitable tomorrow

I am a Canadian and EU national with an MBA and 33+ years experience in aviation business development with 20 years overseas and work in 25+ countries. A former investment/merchant banker (mergers and acquisitions to corporate turnarounds). airline and OEM senior executive and past owner of 6 successful aviation companies in 3 countries (executive jet charter/management companies, aircraft sales, aircraft broker, airline/aerospace consulting to aircraft insurance). I have a very diverse aviation background with 75+ aviation companies (45+ airlines of all sizes, OEM's, airports, lessors, MRO to service providers) as consultant, executive management, business analyst and business development adviser. Excellent success track record in International Business Development. Most work with airlines is with new start-ups and restructuring of troubled carriers. I sold new business jets, turboprops and helicopters for Cessna, Raytheon, Gulfstream to Eurocopter as an ASR as well as undertaking sales and marketing of commercial aircraft for Boeing, de Havilland, Dornier, Saab and Beechcraft. Brokered everything from LET-410's to B747's and from piston PA31 to G550 business jets. I look beyond the headlines of the aviation news and analyze what the meaning and consequences of the new information really means. There is a story behind each headline that few go beyond. Picked the name Aviation Doctor, as much of my work has been with troubled companies or those that want and need to grow profitably. I fix problems be in the business, and help with restructuring for a better tomorrow. You can reach me with comments or suggestions at: Tomas.Aviation@gmail.com and I comment a lot on Google+, my Facebook and LinkedIN.

Discussion

No comments yet.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: