Caribbean Aviation Meetup June 14 – 16, 2006, Dominica
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Caribbean Air Transport: The Struggle for a local long term sustainable airline business model continuous. Since the 1950’s, a long term sustainable business model has been illusive like the search for the Holy Grail. Too many airlines have tried and failed and even today, the few that survive are just that, surviving at best, but why ? In Search of a Long Term Sustainable Airline Business Model in the Caribbean Caribbean Aviation Meetup June 14 – 16, 2006, Dominica Presented by Tomas Chlumecky www.AviationDoctor.wordpress.com Some of the 60+ Caribbean Airlines out of business since 1981 Aero Wings Cardinal Airlines Carib Express Carib Aviation BWIA Air BVI Caribbean Star Tobago Express British Caribbean Airways RedJet Helen Air St. Lucia Airways Trans Island Air 2000 Curacao Excel Seagreen Air Transport Air Monserrat Dominair Avia Air Air Caribbean Dominica Fly Aruba Air Calypso Nomad Air Aruba Express Air Aruba Dutch Caribbean Express Antilles Air Boats Air d’Ayiti Dorado Air Aero Virgin Islands Air Jamaica Eagle Air Carib Air EC Express V.I. Seaplane Shuttle Laker Airways Air ALM Guyana Airways Maya Airways Nature Island Express Air Jamaica Express Prinair Global Airline Start-ups and Bankruptcies In 2015, there were 58 new start-up airlines and 55 airline failures. e.g. Canjet, Transaero, Estonian Air, Freedom Air In 2014 there were 83 start-ups and 44 failures. Average number of new start ups was 26 in the 1970’s, 40 in the 1980’s, and 81 in the 1990’s. 2002 to 2004 saw 120+ new start-ups per year. Failures peaked at 123 in 2008. Main reasons for regional airline failures – my experience 1. Poor Management Wrong / inflexible business model Poor leadership Lack of vision Flawed strategy or No strategy Poor financial management Poor sales & marketing Low customer satisfaction Too operations oriented Small airlines are stuck today with old 15 to 19 passenger turboprop airliners today that are on average +35 years old The Production Numbers of current 15-19 seat unpressurized turboprop airliners De Havilland Twin Otters 844 + 95 = 939 (420+ in commercial use) Embraer EMB-110 Bandeirante = 501 (70 in commercial use) LET - 410 = +1,400 (+220 in commercial service) Shorts SC7 = 153 (7 in commercial service) AVIC Y-12 = 220+ (20+ in commercial service) Dornier 228 = 288 (83 in commercial service) GAF N24A = 39 (2 in commercial service), GA18 Airvan 18 ? CASA 212 = 580+ (40 in commercial serice), Indonesian Aerospace N219 ? IAI Arava = 103 (0 in commercial service) PZL M-28/AN28 = 176 (0 in commercial service) Demand for small turboprop airliners is so strong today that current used prices for the DHC-6 Twin Otter are above the original factory prices Only 4 small turboprops are in production today, all with hefty price tags. The Viking Air (Canada) Series 400 Twin Otter priced at $US 7.5 million. A great aircraft being kept in production at 18 units/year. The AVIC Y-12E (China) priced at $+/- 4.0 million, is an updated version with PT6A-135 engines. New Y-12F is 40% bigger, with PT6A65 engines and a 6,000 lbs payload. The Czech built Let-410 UVP-E is popular in Africa and South America, new one with GE H80 engines is around $5.0 million, with a new L-410NG coming in 2017 with H85 engines. The Dornier 228 is now produced by RUAG of Switzerland, only around 3-4 per year priced at $+8.0 million. New 9 to 19 passenger turboprop airliners are coming to market in the next 4+ years. TECNAM 2012 9 passenger mogas 175 kts, $2.2 million Evektor EV-55 Outback, 10-14 seat, 220 kts, STOL, $2.6 m Indonesian Aerospace N219, PT6 powered Mahindra Aerospace GA18 ex-GAF N24A, RR250 powered Total Production of 15-19 Seaters-Unpressurized 1966 to 2000 IAI LET GAF Dornier Shorts Beech DHC CASA EMB 0 200 400 600 800 1000 1200 Units G1-20 Production of 15 to 19 Seat Aircraft 350 300 250 200 150 100 Units Built per Year Built Units 50 0 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 Year Built Total Production Pressurized Unpressurized G1-21 19 Seat Pressurized Aircraft - Equipped Price History $6 000 000 $5 000 000 $4 000 000 J31 1900C $3 000 000 1900D Metroliners $2 000 000 $US Price in Year Built Year in Price $US $1 000 000 $0 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 Year Built G2-05 20-30 Seat Production 140 120 100 80 60 40 Units Built per Year 20 0 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 Year Built Total production BAe J41 Dornier 328 EMB-120 SF340 SD330 G1-22 Production of 15 to 30 Seat Aircraft 350 300 250 200 150 100 Units Built per Year Built Units 50 0 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 Year Built 15-19 Seat 20-30 Seat Total 15 to 30 Seat G1-23 New 30 seat aircraft – Dornier 328 • Sierra Nevada (USA) bought Dornier 328 Support GmbH • Will produce the aircraft in Turkey along with the Do328Jet • 2019 ? 2015 second hand turboprop airliner market activity 16 x ATR-42 transactions 60 x ATR-72 transactions 113 x DHC-8 transactions 9 x Fokker 50 transactions 47 x Saab 340/2000 transactions 308 x A320’s / 68 x A319’s / 238 x B737NG’s Driver of Growth – GDP per Capita Barbados 5 trips, St. Lucia 4 trips, Bahamas 8 trips, Suriname 0.6 trips Caribbean Air Traffic – World Bank 2015 Study 3 distinct country groups in the region Small Island States > Antigua & Barbuda, Dominica, Grenada, St. Kitts & Nevis, St. Lucia, St. Vincent & the Grenadines Caribbean Hub Countries > The Bahamas, Barbados, Dominican Republic, Jamaica, Trinidad & Tobago Continental Caribbean Countries > Belize, Guyana, Haiti*, Suriname 3 route categories according to origins and destinations 1. Domestic Routes: a pair of O&D destinations in same country 2. Intra-Regional Routes: Caribbean origin and destination airports 3. Extra Regional Routes: connecting the Caribbean with outside destinations Caribbean Air Traffic - 2 CARICOM has a multilateral air services agreement from 1996 Agreement’s aim was liberalization of air services It is weak, allows for negotiations and permissions under “reasonable circumstances”, which is open to interpretation by each state Open Skies agreement based on allowing free market to determine levels of services between states Aim is for NO restrictions on int’l route rights, number of designated airlines, capacity, frequency or type of aircraft. A liberal air fare regime only altered if both governments object. Caribbean Air Traffic – 3 Total Traffic (2013) Small Island States seats 2,450,188 (7.8% of total) Most was St. Lucia 829,738 (34% of Small Island States) Least was St. Vincent & the Grenadines 122,642 (5%) all Intra Regional Caribbean Hub Countries total seats 25.53 million Most was Dominican Republic 10.52 million (41%). Total for entire Caribbean 3 groups was 31.37 million Caribbean Air Traffic – 4: Domestic (2013) Domestic Routes 3.03 million seats (10.4% of total) 3 countries have over 90% of domestic traffic 1. The Bahamas (1.50 million seats, 50%), 5 year growth of 9.6% > Operators: Southern Air Charters (57%), Bahamasair (26%), Sky Bahamas (17%) 2. Trinidad & Tobago (966,732 seats, 32%), 5 year growth of 5.4% 3. Belize (379,223 seats, 13%), 5 year growth of -3.3% > Operators: Maya Island Air, Tropical Air No data on St. Kitts to Nevis, Antigua to Barbuda, St. Vincent to Grenadines and Montserrat to Antigua. No domestic scheduled services in Dominican Republic, Guyana and Suriname. Caribbean Air Traffic – 5: Intra Regional (2013) Intra Regional Routes 2.65 million seats (8.4% of total) Small Island States 882,830 seats (33% of intra regional) Caribbean Hub Countries 1.34 million (51% of intra regional) 1. Antigua & Barbuda 209,261 (8% of total intra regional) 2. Dominica 78,481 (3%) 3. Grenada 174,226 (6.5%) 4. St. Kitts & Nevis 59,787 (2%) 5. St. Lucia 238,433 (9%) 6. St. Vincent and the Grenadines 122,642 (5%) 7. Barbados 409,279 (15%) 8. Trinidad & Tobago 788,723 (30%) In 2012 LIAT had 80% of the Small Island States seats and Caribbean Airlines 15% Caribbean Air Traffic – 6: Scheduled Service Airlines in the EC LIAT is majority owned by Barbados, Antigua & Barbuda, St. Lucia and Dominica, and operates 5 x ATR-42-600’s (48 passenger) and 4 x ATR-72-600’s (68 passenger) Caribbean Airlines is owned by the Government of Trinidad & Tobago and operates 5 x ATR-72-600’s (68 passenger) and 12 x Boeing B737-800’s (154 passenger). Caribbean Air Traffic – 7: Other Regional Airlines 1. Inter Caribbean Airways (Turks & Caicos), 9 x Emb-120’s, 3 x B99’s 2. SVG Air (St. Vincent & the Grenadines), 6 x DHC-6, +6 x BN2’s, 1 x CE-402’s 3. Air Antilles Express (Guadeloupe) 4 x ATR-42, 2 x DHC-6’s, 2 x CE208’s 4. Winair (Saint Maarten) 5 x DHC-6 5. Sky Bahamas (Bahamas) 4 x SF 340’s 6. Bahamasair (Bahamas) 3 x ATR-42, 2 x ATR-72, 3 x B737-500’s Multi Government Owned Airlines-EAA • East African Airways 1946 to 1977 • Kenya, Tanzania and Uganda • By 1975 EAA had $120 m in debts • Tanzania and Uganda not paying debts • 1977 the airline collapses • Each country formed its own airline • Kenya Airways • Uganda Airlines • Air Tanzania Multi Government Owned Airlines – Air Afrique • 1961 to 2002 • Formed by 11 ex-French countries • UAT and Air France took 34 % • 1971 Cameroon formed Cameroon Airlines • 1976 Gabon formed Air Gabon • While Mali, Togo and Sierra Leone joined • 1980’s “africanisation” started decline • 1998 down to 11 aircraft • 2001 debt at $431 million • By 2002