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Concept Paper Air Transport CARIBBEAN COMMUNITY CONCEPT PAPER STRATEGIC PLAN FOR AIR TRANSPORT SERVICES IN CARICOM January 11, 2009 El Perial Management Services CARIBBEAN COMMUNITY CONCEPT PAPER STRATEGIC PLAN FOR AIR TRANSPORT SERVICES IN CARICOM Table of Contents The Air Transport Imperative …………………………………………………01 Air Transport Demand…………………………………………………………03 Overview of the Air Transport Sector…………………………………………06 Strengthening The Regional Airlines………………………………………….14 Recommendations……………………………………………………………..18 CONCEPT PAPER STRATEGIC PLAN FOR AIR TRANSPORT SERVICES IN CARICOM This Concept Paper has been commissioned by the CARICOM Secretariat to be presented at a Regional symposium to develop the “Elements of the Strategic Vision for Services Sector Development in the Caribbean Community (CARICOM)”. As a start the paper has to understand the level of need for efficient air transport services in the CARICOM Region (Region). THE AIR TRANSPORT IMPERATIVE The paper recognises that CARICOM is: • a grouping of small sovereign countries, mainly islands with small populations and open economies, that rarely enjoy economies of scale • characterised by separation by water which seems to negatively impact cooperative attitudes and behaviour • a large geographic area; the distance between Suriname in South America and Belize in Central America is c.a. 2081 nautical miles or a flying time of c.a. 4hrs 20mins by jet aircraft. • regularly afflicted by hurricanes that adversely impact infrastructure, primary industries (tourism and agriculture) and already limited government resources • is heavily dependent upon air transport as the Year 2007 visitor arrival statistics in Appendix A show • in the early stages of implementing the CARICOM Single Market (CSM) aspect of the CARICOM Single Market and Economy (CSME) which forms the central theme of the 2001 CARICOM Revised Treaty of Chaguaramas. At present, the full members of CARICOM other than Bahamas and, Montserrat are members of the CSME. Revised Treaty of Chaguaramas The paper has therefore been developed cognisant of the absolute imperative for effective air transport services to/from and within CARICOM and the related emphasis placed on air transport in the Revised Treaty. I. The Preamble of the Revised Treaty notes: • the vital importance of….air…. transportation for maintaining economic, social and cultural linkages…. among the Member States of the Community • the importance of promoting adequate air…. transport services for the continued viability of the tourism industry and of reducing the vulnerability of the CARICOM Region resulting from its reliance on extra-regional carriers • that a viable transport policy for the Community will make a significant contribution in satisfying the demands for the intra-regional movement of people and products in the CSME II. The CARICOM Transport Policy seeks to provide adequate, safe and internationally competitive transport services for the development and consolidation of the CSME. Its objectives are: • the organisation of efficient, reliable, affordable, transport services throughout the Community • the development and expansion of air….transport capabilities in the Community • the promotion of cooperative arrangements for the provision of transport services • the development of efficient internationally competitive ancillary transport services • the development of human resources for employment in all areas and at all levels of the transport sector • the implementation of standards for the development of safe….air transport services III. Member States are mandated to cooperate in: • the development of air transport services in the Community and towards this end may conclude among themselves air transport agreements designed to facilitate the provision of such services • establishing measures to ensure that the provision of international air transport services in the Community is undertaken by financially viable and technically qualified carriers and operators and that the Community interest in safety, security and economy of air travel is not prejudiced • ensuring uniformity in licensing and certification procedures and equivalencies within the Community for aviation personnel in conformity with international standards. Key CARICOM Strategies CARICOM countries, as a group but normally as sovereign states, have applied various strategies, with varying degrees of success, in their pursuit of effective air transport services to/from and within the Region. The primary strategies include: • diversification of airlift sources i.e. liberalised air service agreements/practices and aggressive wooing of external airlines (but with the primary focus on international air service) • ownership of airlift capability i.e. domiciled airlines, preferably through private sector funding (but usually through public sector funding) In a number of countries there is sometimes a sense of conflict between these two (2) strategies. 2 In summary, to date: • all members of CARICOM are committed to liberalisation of international air service agreements with one (1) extending this to a formal ‘open skies’ Air Services Agreement (ASA) (with the United States) and another to a formal ‘open skies type’ ASA (with Canada) • four (4) are committed to ownership of airlines providing international service even though such service may be very limited • three (3 are committed to ownership of airlines providing regional service even though such service has been limited to the Eastern Caribbean • ten (10 are committed to a somewhat liberal intra-regional air service agreement that is de facto confined to the Eastern Caribbean. In addition to the primary strategies, the major support strategy is joint action to improve the safety and security aspects of air transport through maintenance of the Cricket World Cup security mechanisms and the establishment of the Association of Civil Aviation Authorities of the Caribbean (ACAAC) and its implementation arm Caribbean Aviation Safety and Security Oversight System (CASSOS) which is now an institution of CARICOM. Given the socio-economic imperatives of the CSME and the current related realities, the fundamental issues that should be examined in the strategic plan are how to: • optimise the value of the diversification of air services (liberalisation including ‘open skies’) • strengthen the CARICOM domiciled airlines so that they can provide the sustained quality of service that the CSME needs and optimize their partnership with the tourism sector • Ensure that the safety and security systems are enhanced while improving customer friendliness and that the potential of CASSOS is achieved AIR TRANSPORT DEMAND People rarely fly as an activity in itself. Usually people use air transport services to visit a place because of some combination of need, willingness and desire aided by the affordability, access and convenience of the air travel experience. In effect people use air transport services when there is a demand for such usage to meet another objective. The provision of air transport services, while viewed as part of a community’s transport infrastructure, is usually conducted as a profit-making enterprise. Air transport service companies meet (and stimulate in areas within their control) demand for travel, using highly mobile assets, in an attempt to earn an acceptable return on investment. 3 In CARICOM the main drivers of that demand are the attractiveness and effective marketing of the Region’s tourism product and the intra-regional imperatives of the CSM(E). The extent to which that demand is perceived by airline managements’ to permit the achievement of an acceptable return on employed assets, determines their willingness to provide such air transport services. The air transport sector, inclusive of airport infrastructure and facilitation, is an important but subsidiary component of the tourism product even as it is dependent on that product for its success. The fact that CARICOM’s long standing tourism product, which is the main driver of the Region’s economic development, has: • generated a much lower increase in demand than the world-wide tourism product • required growing levels of guarantees to maintain air service levels points to the need for an objective review of the tourism product. In the conduct of that review, the following definitions may be useful. In these definitions ‘community’ is generic and can be as small as a village and as large as CARICOM. Tourism “Tourism is a potentially effective way of expanding and deepening economic activity through the expansion of the population of a community by short stay persons with a disposition to spend on services that provide value. To be effective over the long term that population expansion must be of value to the tourist (as the person exercising choice) and to the host community. The community must therefore conserve, develop and protect the things and culture that are of value to its residents and to its selected tourism target markets. To provide meaningful and sustainable service there must be the development of a relationship of mutual respect and thus inter-dependence between provider and recipient and their co-management of the service”. The related role of tourism planning in guiding the sustained development of tourism and the related tourism product in a community must therefore be: “The development of policy and implementation strategies that permit its residents to deliver innovative services of superior value at lower relative cost, consistently and over the long term, to a well defined set
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