Caribbean Airlines needs a turnaround flight plan

On August 11, Prime Minister Kamla Persad Bissessar issued an ultimatum to the management of state-owned Caribbean Airlines Ltd (CAL) to "sort out the mess" in two years maximum or find a new job. PM Persad Bissessar must be commended for rein in what appears to be a runaway horse.

I worked at BWIA for over 31 years, half of which was spent in managerial positions, the last being director of flight safety.

As the DGCA, I became BWIA/CAL regulator for over 16 years. Therefore, I am quite knowledgeable about the air transport industry's operations and regulatory dimensions.

I witnessed many attempts by previous governments, boards and management to position CAL and its predecessor BWIA to navigate a profitable flight path.

Numerous strategic business plans were developed, all of which failed to attain the cruising altitude for continued financial viability.

Consequently, billions of taxpayers’ dollars are spent to keep CAL nose-up.

The airline industry is highly capital-intensive, complex, hypercompetitive and dynamic.

This requires continuous innovation and process re-engineering in all areas of operations for CAL to be on course for financial success.

In its journey towards self-sufficiency, CAL needs a realistic turnaround flight plan that identifies critical waypoints such as a differentiated airline product with strong marketing and branding, strategies for enhancing revenues, optimal fleet utilisation, competitive pricing, robust cost management, operational efficiencies using automation technologies, performance reliability, safety and accountability at all levels.

Aircraft on the ground do not earn revenue. CAL must increase the average daily utilisation of its aircraft fleet.

If there is perennial excess capacity, the fleet size should be reduced, resulting in savings on lease costs.

CAL should enhance customer experience by providing excellent customer service from seat reservation, airport check-in, in-flight service and a seamless on-time journey.

This will differentiate CAL from its competitors, building customer loyalty.

In 1994, another BWIA union colleague and I travelled to Washington, DC, to meet with Edward Acker, the CEO of Atlantic Coast Airlines (ACA), to discuss the privatisation of BWIA, which Acker was leading.

We met at ACA’s offices and held discussions with Acker about his plans to turn around BWIA.

Acker got up and walked to a marker board and drew two lines: a red line representing BWIA’s expenditures and below it, a black line representing BWIA’s revenues.

Acker said using the two core business strategies of reducing costs and increasing revenues, the red line will drop below the black line signifying profitability.

Surprisingly, Acker said he could not understand how BWIA was managed without information. When pressed to explain, Acker showed us a report on the previous day’s performance of ACA which he receives every morning at 9.00 am.

The report presented, on a route-by-route basis, the actual load factors, the breakeven load factors and the variance.

ACA marketing and sales executives had to report on the causes for the underperforming routes and the proposed remedial action.

Acker underscored that an airline’s performance cannot be managed, unless it can be measured.

Now, 31 years later, with today’s powerful airline accounting software, CAL’s IT department, using ACMI costs, variable costs and passenger revenue data, can provide real-time performance metrics for each route. The commercial and marketing departments can then analyse the routes' performance and determine the causes for underperforming routes and initiate remedial actions.

CAL is rapidly losing market share to JetBlue on the POS/JFK route and to American Airlines on the POS/MIA route.

Is there any analysis of this market share loss to determine the strategies for regaining market share?

Mindful of price sensitivity, CAL’s commercial department in consultation with the marketing and sales department, must set competitive fares.

If not, CAL will continue to lose market share.

Through innovative revenue management and dynamic pricing, CAL can optimise the revenue per available seat mile (RASM) on all its routes.

Likewise, cost reduction measures will reduce the cost per available seat mile (CASM).

Recently, CAL added new destinations such as Puerto Rico, Martinique, Guadeloupe and Tortola to its route network.

Were these new destinations added on the basis of robust market research and analysis to determine the routes’ viability?

Likewise, has CAL done any market research on potential routes such as Bogota, Panama and Houston?

CAL needs to confront growing intra-regional competition.

Antigua and Barbuda-based LIAT Air is backed by Nigerian investors. It is expanding its Caribbean route network, obtaining route rights under the Caricom MASA.

However, the greater threat can come from a looming Guyanese-based airline that will operate flights to Panama, Toronto, New York, Fort Lauderdale and Houston.

There is an "open skies" BASA between the US and Guyana. Under the CASSOS agreement, Guyana can easily become an FAA IASA Category One country.

Due to the large Guyanese diaspora in North America, and its nascent oil industry, Guyana is fast becoming a lucrative air transport market.

CAL’s most valued asset and the drivers of success is its human resource capital.

A people-centric organisational culture seems lacking at CAL.

Its HR functions must be overhauled to promote an organisational culture that engenders trust, equity, shared values, teamwork and increased productivity.

The top management of most successful airlines discusses the airline's draft strategic business plan with all employees at face-to-face meetings before presentation for board approval.

This fosters employee engagement and a buy-in to the business plan, boosting morale and goal-driven productivity.

There is disquiet at town hall meetings between employees and CAL’s senior-level team.

Employee questions are filtered, goading uneasiness among the employees that can be intimidating.

Giving employees a "welcome home" polo shirt is not engaging.

Management must ensure maximum employee engagement based on candour and two-way information sharing about CAL’s strategic goals, objectives and performance.

When in crisis, an airline’s senior-level team led by the CEO must be most visible, literally "walking the floor 24/7" discussing the operating results with employees in face-to-face meetings and encouraging employees’ suggestions for improved performance.

Clearly, CAL’s critical success strategies are not working. The root causes must be identified.

Meaningful management and employee teamwork is required to craft and implement an achievable and sustainable turnaround plan in quick time.

Failing this, Kamla 2.0 may stick to her ultimatum and end the largesse.