[UPDATED] Ramesh Lutchmedial: Each Tobago flight loses $40,800

A Caribbean Airlines plane
A Caribbean Airlines plane

EACH CAL flight between Tobago and Trinidad loses at least $40,800 even if it is filled, Ramesh Lutchmedial, retired director general of Civil Aviation, claimed in a statement on Monday, urging a new model of flight operations.

He said while the Tobago House of Assembly (THA) has called for more flights, CAL has consistently lost millions of dollars.

"CAL and its predecessor BWIA rarely achieved profitability throughout their existence. requiring taxpayers’ support to the tune of billions of dollars to remain airborne.

"More recently, the covid19 pandemic negatively impacted CAL’s ability to achieve the objectives of its recovery business."

Lutchmedial said while stakeholders like the chamber, THA and hoteliers have a right to clamour for more flights, serious underlying issues must be tackled.

"The airline industry is extraordinarily complex and requires lots of cash to meet capital and operating expenses.

"For every route, airlines determine the cost to produce a seat on the flight and the realistic passenger loads at which the revenues generated meet the cost of operating the flight. This is known as the break-even load factor, and loads in excess of the break-even load factors realise operating profits."

He said the airbridge does not afford passengers the luxury of showing up at the airport at any time to board a flight.

"Airline flight schedules are structured based on passenger demand, travel patterns and convenient travel times to achieve the optimum load factors. Besides, flight operations, flight-crew duty times, maintenance and air-traffic procedures are stringently regulated by law to ensure that the highest levels of operational safety are achieved.

"Further, on the domestic airbridge, demand is not always constant or balanced. Demand is directional on certain days, such as Fridays to Tobago and on Sundays to Trinidad.

"This means that on the return legs, the load factors can be low, with lots of empty seats. A critical point to note is that airline seats are uniquely 'perishable' products."

Lutchmedial argued that the government has a public-service duty to provide air transport linkages to support social and economic activities in Tobago.

"Most passengers who are domiciled in Tobago and use the airbridge for essential travel may not be able to afford the full economic fare.

"Therefore, the solution may well lie in a two-tier fare system, a subsidised fare for Tobago residents and an economic fare for non-residents."

Government subsidy does not cover shortfall

He said in 2017 a CAL official told a parliamentary select committee the present airbridge airfare of $300 had been fixed for over ten years and did not cover $600-$700 operating costs, even with a $100 government subsidy.

Lutchmedial estimated that, today, based on current fuel prices, the cost of providing a return passenger seat on the airbridge using an ATR-72 aircraft is about $1,000.

"With a $400 revenue for a trip, this results in an operating deficit of $600 per return seat, and $40,800 per return flight using a 68-seater ATR72-600 aircraft. Even if airbridge flights are operated at 100 per cent load factors, the revenue earned by airfare and subsidy is well below the economic cost of providing the service."

He said CAL must review the cost of providing the airbridge service through an appropriate means such as a subsidy.

While subsidising flights to Tobago was not new and had even included the THA paying millions to subsidise foreign airlines, mainly from Europe, for airlift to support its tourism industry, he said Corporation Sole has mandated CAL to achieve self-sufficiency.

Lutchmedial said CAL was walking a tightrope between Corporation Sole's mandate to become self-sufficient (due to dwindling government revenues/support) and stakeholders' demand for increased capacity on the airbridge, whose losses were due to high operating costs and low revenues.

Saying all airlines, private and state, previously operating the airbridge could not do so profitably, as costs exceeded revenues, Lutchmedial said the existing airbridge model had never worked.

"The solution to the airbridge problems requires creativity, such as crafting a new airbridge model that is in keeping with modern airline marketing principles and practices and inclusive of aircraft type, capacity, frequency, airfare and subsidies.

"This new model can be jointly developed by all the stakeholders, including Corporation Sole, CAL, THA, Tobago Business Chamber and the hoteliers.

"However, key elements of a new airbridge model such as airfares and subsidies require the approval of government, in whose court the airbridge ball sits."

Minister: Subsidy meant to help Tobagonians

Minister in the Ministry of Finance Brian Manning told Newsday the subsidy was in place to reduce the cost of living for TT nationals and to help to boost the economy of Tobago.

"It's all about improving the lives of Tobagonians and improving our overall economy."

Newsday asked how he predicted developments happening to strike a balance between improving CAL's operating and efficiency and reducing the subsidy.

"I couldn't speculate on what is to be done but under this caring Government that subsidy is to help to develop Tobago especially during these trying times."

Manning said this was crucial now as Tobago was emerging from the effects of pandemic lockdowns which had hurt its tourism industry upon which Tobago's economy was built.

"We are always looking for ways in which we can be more efficient in spending taxpayers dollars but at the end of the day we will do what's in the best interest of both Trinidad and Tobago."

Tobago Hotel and Tourism Association VP Carol-Ann Birchwood-James told Newsday the airbridge needed some kind of rethink, based on consultations and discussions with data and research.

She wanted to look into Lutchmedial's figures.

"We have to bear in mind that the Tobagonian is a taxpayer and that they contribute to the airline. We have to factor all of that in their connotations, data that they are presenting which we seem to want to ignore."

Birchwood-James used the opportunity to urge more capacity such as by CAL leasing an aircraft during peak periods such as Tobago Carnival, July/August holidays and Easter.

"That doesn’t mean that we have to leave out the seabridge, because the seabridge can also double up. So it is something that everybody needs to sit down and discuss it. How best we can make this better.

"It is not acceptable for CAL to say, 'This is the best that we can do.' It is not acceptable because when we need to make a little money here in Tobago, we are suffering, meaning to say that CAL has a stranglehold on us."

This story has been adjusted to include additional details. See original post below.

EACH CAL flight between Tobago and Trinidad loses at least $40,800 even if it is filled, Ramesh Lutchmedial, retired director general of Civil Aviation, claimed in a statement on Monday, urging a new model of flight operations.

Saying the Tobago Business Chamber blamed the airbridge for CAL's losses, he said while the Tobago House of Assembly (THA) has called for more flights, CAL has consistently lost millions of dollars.

"CAL and its predecessor BWIA rarely achieved profitability throughout their existence. requiring taxpayers’ support to the tune of billions of dollars to remain airborne.

"More recently, the covid19 pandemic negatively impacted CAL’s ability to achieve the objectives of its recovery business."

Lutchmedial said while stakeholders like the chamber, THA and hoteliers have a right to clamour for more flights, serious underlying issues must be tackled.

"The airline industry is extraordinarily complex and requires lots of cash to meet capital and operating expenses.

"For every route, airlines determine the cost to produce a seat on the flight and the realistic passenger loads at which the revenues generated meet the cost of operating the flight. This is known as the break-even load factor, and loads in excess of the break-even load factors realise operating profits."

He said the airbridge does not afford passengers the luxury of showing up at the airport at any time to board a flight.

"Airline flight schedules are structured based on passenger demand, travel patterns and convenient travel times to achieve the optimum load factors. Besides, flight operations, flight-crew duty times, maintenance and air-traffic procedures are stringently regulated by law to ensure that the highest levels of operational safety are achieved.

"Further, on the domestic airbridge, demand is not always constant or balanced. Demand is directional on certain days, such as Fridays to Tobago and on Sundays to Trinidad.

"This means that on the return legs, the load factors can be low, with lots of empty seats. A critical point to note is that airline seats are uniquely 'perishable' products."

Lutchmedial argued that the government has a public-service duty to provide air transport linkages to support social and economic activities in Tobago.

"Most passengers who are domiciled in Tobago and use the airbridge for essential travel may not be able to afford the full economic fare.

"Therefore, the solution may well lie in a two-tier fare system, a subsidised fare for Tobago residents and an economic fare for non-residents."

He said in 2017 a CAL official told a parliamentary select committee the present airbridge airfare of $300 had been fixed for over ten years and did not cover $600-$700 operating costs, even with a $100 government subsidy.

Lutchmedial said today the cost of providing a return passenger seat on the airbridge using an ATR-72 aircraft is about $1,000.

"With a $400 revenue for a trip, this results in an operating deficit of $600 per return seat, and $40,800 per return flight using a 68-seater ATR72-600 aircraft. Even if airbridge flights are operated at 100 per cent load factors, the revenue earned by airfare and subsidy is well below the economic cost of providing the service."

He said CAL must receive the cost of providing the airbridge service through an appropriate means such as a subsidy.

While subsidising flights to Tobago was not new and had even included the THA paying millions to subsidise foreign airlines, mainly from Europe, for airlift to support its tourism industry, he said Corporation Sole has mandated CAL to achieve self-sufficiency.

Lutchmedial said CAL was walking a tightrope between Corporation Sole's mandate to become self-sufficient (due to dwindling government revenues/support) and stakeholders' demand for increased capacity on the airbridge, whose losses were due to high operating costs and low revenues.

Saying all airlines, private and state, previously operating the airbridge could not do so profitably, as costs exceeded revenues, Lutchmedial said the existing airbridge model had never worked.

"The solution to the airbridge problems requires creativity, such as crafting a new airbridge model that is in keeping with modern airline marketing principles and practices and inclusive of aircraft type, capacity, frequency, airfare and subsidies.

"This new model can be jointly developed by all the stakeholders, including Corporation Sole, CAL, THA, Tobago Business Chamber and the hoteliers.

"However, key elements of a new airbridge model such as airfares and subsidies require the approval of government, in whose court the airbridge ball sits."

This story has been adjusted to include additional details. See original post below.

EACH CAL flight between Tobago and Trinidad loses at least $40,800 even if it is filled, Ramesh Lutchmedial, retired director general of Civil Aviation, claimed in a statement on Monday, urging a new model of flight operations.

Saying the Tobago Business Chamber blamed the airbridge for CAL's losses, he said while the Tobago House of Assembly (THA) has called for more flights, CAL has consistently lost millions of dollars.

"CAL and its predecessor BWIA rarely achieved profitability throughout their existence. requiring taxpayers’ support to the tune of billions of dollars to remain airborne.

"More recently, the covid19 pandemic negatively impacted CAL’s ability to achieve the objectives of its recovery business."

Lutchmedial said while stakeholders like the chamber, THA and hoteliers have a right to clamour for more flights, serious underlying issues must be tackled.

"The airline industry is extraordinarily complex and requires lots of cash to meet capital and operating expenses.

"For every route, airlines determine the cost to produce a seat on the flight and the realistic passenger loads at which the revenues generated meet the cost of operating the flight. This is known as the break-even load factor, and loads in excess of the break-even load factors realise operating profits."

He said the airbridge does not afford passengers the luxury of showing up at the airport at any time to board a flight.

"Airline flight schedules are structured based on passenger demand, travel patterns and convenient travel times to achieve the optimum load factors. Besides, flight operations, flight-crew duty times, maintenance and air-traffic procedures are stringently regulated by law to ensure that the highest levels of operational safety are achieved.

"Further, on the domestic airbridge, demand is not always constant or balanced. Demand is directional on certain days, such as Fridays to Tobago and on Sundays to Trinidad.

"This means that on the return legs, the load factors can be low, with lots of empty seats. A critical point to note is that airline seats are uniquely 'perishable' products."

Lutchmedial argued that the government has a public-service duty to provide air transport linkages to support social and economic activities in Tobago.

"Most passengers who are domiciled in Tobago and use the airbridge for essential travel may not be able to afford the full economic fare.

"Therefore, the solution may well lie in a two-tier fare system, a subsidised fare for Tobago residents and an economic fare for non-residents."

He said in 2017 a CAL official told a parliamentary select committee the present airbridge airfare of $300 had been fixed for over ten years and did not cover $600-$700 operating costs, even with a $100 government subsidy.

Lutchmedial said today the cost of providing a return passenger seat on the airbridge using an ATR-72 aircraft is about $1,000.

"With a $400 revenue for a trip, this results in an operating deficit of $600 per return seat, and $40,800 per return flight using a 68-seater ATR72-600 aircraft. Even if airbridge flights are operated at 100 per cent load factors, the revenue earned by airfare and subsidy is well below the economic cost of providing the service."

He said CAL must receive the cost of providing the airbridge service through an appropriate means such as a subsidy.

While subsidising flights to Tobago was not new and had even included the THA paying millions to subsidise foreign airlines, mainly from Europe, for airlift to support its tourism industry, he said Corporation Sole has mandated CAL to achieve self-sufficiency.

Lutchmedial said CAL was walking a tightrope between Corporation Sole's mandate to become self-sufficient (due to dwindling government revenues/support) and stakeholders' demand for increased capacity on the airbridge, whose losses were due to high operating costs and low revenues.

Saying all airlines, private and state, previously operating the airbridge could not do so profitably, as costs exceeded revenues, Lutchmedial said the existing airbridge model had never worked.

"The solution to the airbridge problems requires creativity, such as crafting a new airbridge model that is in keeping with modern airline marketing principles and practices and inclusive of aircraft type, capacity, frequency, airfare and subsidies.

"This new model can be jointly developed by all the stakeholders, including Corporation Sole, CAL, THA, Tobago Business Chamber and the hoteliers.

"However, key elements of a new airbridge model such as airfares and subsidies require the approval of government, in whose court the airbridge ball sits."

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"[UPDATED] Ramesh Lutchmedial: Each Tobago flight loses $40,800"

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