A Caribbean Airline for the Caribbean?

This year saw the formation at last of what may become a truly Caribbean Airline:
Caribbean Airlines acquired Air Jamaica.

An acquisition which has yet to lead to a successful merger; the latter being necessary for economic sustainability of the newly formed enterprise. But these things take time as those who deal in Mergers and Acquisitions know only too well and sometimes time alone is not enough to ensure success.

For what we have are 2 different airlines operating different business models. Simply keeping the airlines operating in the same manner post-acquisition, side by side, will not be enough. It’s a matter of deriving synergies from each other and creating an entirely new operational model by disassembling parts of what they do and reassembling them - like a new jigsaw puzzle.

Caribbean Airlines serves mainly its Trinidadian and Tobagonian citizens to key North American metropolises – New York, Miami, Fort Lauderdale and Toronto - a few capitals in South America - Caracas, Paramaribo, Georgetown - and five Caribbean countries - Antigua, Barbados, Grenada, St Martin, Jamaica.

Air Jamaica now only serves Nassau, Toronto, Philadelphia, New York and Fort Lauderdale from its 2 airports in Jamaica – Kingston and Montego Bay. This group of 5 destinations is substantially reduced from the over 12 destinations the airline serviced only a few years ago.

At first glance these 5 destinations don’t really offer much by way of an acquisition. And they don’t.

The true value of Air Jamaica, apart from its important skilled employees and airline infrastructure - which took years to develop - is the latent potential of the 2 hub airports at Kingston and Montego Bay and the millions of passengers who flew Air Jamaica when it was at its peak of operational scale about a decade ago.
These prospective “prior passengers” are a combination of tourists and diaspora (overseas Jamaicans) living in key cities like Atlanta, Washington, Baltimore, Los Angeles, London, Manchester and so on. So the obvious question is can the new airline reconnect with these potential customers in a way that offers them even greater value for their money in air travel? And can Caribbean Airlines earn more incremental income from such a target group? I think so. However the operational model has to be reconfigured along the lines of servicing the wider Caribbean and the needs of its peoples - not 2 airlines operating from 2 different countries servicing 2 different groups.

To start with we need to configure the new Airline as having 2 or even 3 hubs – say Piarco (Port of Spain), Kingston and Montego Bay. One hub services North America; a second hub serves the Northern Caribbean and Central America; the third hub acts as a gateway to the Southern Caribbean and South America. Feeders into these hubs will be from other hubs (including in Jamaica’s case many other, mainly US airlines that still fly to its airports) as well as third country destinations whose passengers cannot get a US visa to transit that country or want to avoid flying through Miami and New York in particular to connect globally to cities like London and elsewhere. The air traffic carried will be a good robust mix of tourists (of diverse types), business people, VFR’s (visiting friends and family) and opportunistic travellers.

The size of this other prospective customer market of “opportunistic travellers” is not to be under-estimated. There are many countries in the region which do not have a national carrier which would look after their citizen’s interests as a priority or are not able to for whatever reason. Cuba comes to mind as do several countries in Central America. With the pervasiveness of the internet and booking flights directly online via websites becoming more popular (if written in many languages it can become available to others previously excluded) the potential market size increases dramatically. Of course to exploit the competitive edge of accessibility to the new Caribbean airline, staff must be able to communicate in these other languages and the Governments of the region must permit visa-free travel to and from third countries.

Another benefit of this model will be the potential for multi-destination vacations in the Caribbean without multiple changes or “lay-overs” at airports. This presumes more direct non-stop flights between Jamaica and Trinidad / Tobago for example and non-stops between Barbados and Jamaica. These should not crowd out the much needed island-hoppers but these should only really stop once on any single trip.
With such a model opening new destinations becomes potentially more viable than if it were a single national carrier serving mainly one country. In particular, it provides possibilities to more greatly link Spanish speaking countries with English speaking ones in the Caribbean and Central American region. This offers the region exciting opportunities – like reconnecting Kingston with Mexico City after decades of disconnection. Also the ridiculous routing of travelling far north to go back south (South Americans going via Miami to visit the Caribbean) will be made redundant and Trinidad could benefit from more rapidly developing its tourist market and air hub with South American countries.

I agree the new configuration of hubs and air-routes is not something to be undertaken lightly as the challenge is that it is the WHOLE picture taken together that determines the true economics of the model. Furthermore, it is not a simple additive model. One small component (air route, flight times, connection times etc) of the model may disproportionately make the overall model economics much more profitable or much less viable. And the market takes time to respond to new offerings before the whole picture becomes discernible.

Developing new airline routes is always a chicken and egg story. No passengers fly the route because it does not exist. The route does not exist because no people fly between the 2 destinations. It’s an expensive investment process developing a genuinely new route from scratch. However this need not be the case for Caribbean Airlines if it acts quickly as some of these routes will have been flown before by “prior passengers” and are merely being revived. These reconnections will give birth to multiplier effects such as Diaspora travellers bringing other travellers (from their host country) with them as new visitors to the Caribbean region.

I hope that the new Caribbean Airlines can think outside the box and boldly reconstitute its operational model to capitalise on the latent synergies that the combined airlines offer, thereby maximising its economic return. In that way the full potential of a truly regional airline can be realised and substantial economic benefits accrue to Caribbean citizens and our friends who visit us from outside this beautiful region of the world.