The rise and fall of REDjet: The untold story
By Tony Fraser in Trinidad, Ricky Jordan in Barbados and Debbie Ransome in London
Three months after REDjet suspended all its flights, the now-bust Irish-owned airline is left with few friends in high places and many questions about the suitability of a low-cost carrier flying around the Caribbean.
REDjet started up in May 2011 with all the hopes of other global low-cost airlines.
Incorporated in Barbados after an earlier Jamaican registration had been turned down, the airline started up as the shopfront of companies Airone Caribbean and Airone Ventures Ltd.
In its own words, REDjet wanted “to strive continuously to lower fares even further so that ‘Now everyone can fly’."
But that dream has now faded into the blue Caribbean skies. On 8 June 2012, REDjet dismissed its 94 employees and declared itself insolvent.
An outsider would imagine that flights across the Caribbean island chain, with its cheek-by-jowl islands, would be cheap and easy.
However, those in the know and in the region know all about its high fares which work for business travellers on expenses and special occasion trips, but which deter the type of island-hopping that looks like an easy feat on paper.
For those who travel the region regularly, getting from island to island can be an expensive, painful game of wait-and-see, thanks to delayed flights, lost baggage and the regional airline habit of “bumping” all but the great and the good from pre-booked seats.
REDjet entered the market expecting to change all this. With two MD-82 planes, it set off to link Jamaica, Barbados, Trinidad, St Lucia and the much-underserved Guyana with advertised fares starting at US$9.99 one-way.
In a region where a 20-minute flight from Trinidad to Barbados can cost around US$90, this promised to revolutionise the island-hopping experience in the Caribbean.
But the writing was on the wall when REDjet suspended its flights on 16 March 2012, promising that existing tickets would be honoured by other airlines or refunded.
The airline’s suspension notice hinted at sabotage by its rivals.
“Unlike the heavily subsidised airlines that serve the region, REDjet does not receive any assistance,” it said.
“As indicated, REDjet is hopeful that we will be given a small part of the State assistance others receive, as it will allow us to get our recently approved and exciting new routes established and profitable.
“Once this happens, our shareholders and staff will do their utmost to see that there is no return to high fares and business as usual.
“We have seen other carriers drastically cut their fares in an effort to shut down REDjet and return to high fares and business as usual, with no regard to the negative impact on travellers.
“Unlike us, they do not have to be profitable to stay in business.”
The finger was clearly being pointed at oil-rich Trinidad and Tobago and its heavily-subsidised state airline Caribbean Airlines Limited (CAL) which replaced the long-running BWIA in 2006.
CAL, which took over rival Air Jamaica in 2011, has been cast as the villain in the demise of REDjet. But in Port of Spain, the story gets more complicated.
Man “with two planes”
Not only did the government of Trinidad and Tobago turn its back on helping to salvage REDjet, but Transport Minister Devant Maharaj said that state-owned CAL was preparing to service the intra-Caribbean routes previously flown by the stricken airline.
Mr Maharaj told Caribbean Intelligence© that he had discussed the matter with some of his eastern Caribbean counterparts.
He recently met the Chairman of the Caribbean Tourism Organisation, Ricky Skerritt (also Tourism Minister of St Kitts and Nevis) and the Tourism Minister of Barbados, Richard Sealy.
“They are both in full agreement with CAL’s plans for flying the intra-Caribbean routes,” Mr Maharaj said.
He was fairly scathing about REDjet, saying it “was not really an airline, but a man with two planes”.
Mr Maharaj said the Trinidad and Tobago government, which took some time before granting REDjet an operating licence to fly into Trinidad's Piarco airport hub, had revoked the airline’s air operation certificate.
He said he saw little prospect of it being renewed in the foreseeable future.
Right to subsidy?
REDjet had maintained that, as a legitimate business under the Caricom regional trade group's Single Market and Economy, it had been denied the benefits and rights that it was due for transporting Caribbean people across the region.
REDjet chairman Ian Burns told a seminar on the regional airline industry in early 2012 that his airline was legally entitled to these regional benefits.
And after the suspension, Mr Burns argued that REDjet should receive the same subsidised fuel allowance as the one given to CAL by the Trinidad government.
Trinidad's Devant Maharaj denies that any such pitch for subsidised fuel was made to him directly by REDjet.
In any case, he argues that the Trinidad government subsidy to CAL is intended to make sure that Trinidad and Tobago nationals are able to travel in competitive times when large legacy carriers are cutting routes.
Mr Maharaj described REDjet in May as “a private business venture - and all such ventures carry a risk”.
Eastern Caribbean boost
Outside of Port of Spain, the view of REDjet and its demise is more generous.
The Caribbean Tourism Organisation's Ricky Skerritt told Caribbean Intelligence© that “REDjet was a major stimulus of competition for CAL and LIAT”.
“The REDjet example showed there was a pent-up desire for intra-regional travel which had been suppressed because of price factors,” Mr Skerritt explained.
REDjet's Ian Burns had called it an “elitism” in air travel which had “enslaved aviation for decades”.
He had described the regional travel market as “restricted to primarily the top 10% of consumers and until REDjet arrived, no one was concerned about the majority”.
For his part, Mr Skerrit, wearing his hat as Tourism Minister of St Kitts and Nevis, where the World Travel and Tourism Council estimates that tourism contributed 28% of GDP in 2011, argues that there is nothing wrong with governments investing in travel, through grants and subsidies to privately-owned airlines.
“I, as Minister, have invested in airlines bringing tourists into St Kitts,” says Mr Skerritt.
There are many officials in the smaller eastern Caribbean, where economies are more heavily dependent on tourism, who will argue that REDjet did make a difference to regional tourism.
Respected veteran Barbadian businessman Ralph “Bizzy” Williams expressed his disappointment the day after the Barbados-based low-cost carrier suspended flights.
He said that the loss of the carrier, which employed close to 90 people with approximately 10 flights weekly out of Barbados’ Grantley Adams Airport, would have a severe effect on those who travelled for as low as BDS$19.98 (US$9.99) before taxes.
“The amount of Caricom nationals flying to Barbados has increased by about 50% since REDjet started flying,” Mr Williams told Caribbean Intelligence©.
He resigned from the REDjet board in early May after coming under fire for publicly stating that there was no way the airline could rise again after the suspension.
Tourism Minister Richard Sealy told the Barbados parliament that REDjet’s situation would hurt many in the region, especially families who had been reunited or had travelled for the first time.
“It is my sincere hope that everything can be sorted and that they can resume operations as soon as possible,“ he had said.
Mr Sealy told Caribbean Intelligence©, before the news of the airline's insolvency, that the Barbados Tourism Authority would be willing to work with REDjet in a relationship again.
On the topic of levelling the aviation playing field, Barbados’ Minister of International Business and International Transport, George Hutson, said that LIAT was doing no better than REDjet.
He told Caribbean Intelligence© that 55-year-old LIAT, the original island-hopper, should adopt some of REDjet’s good points into its business model.
Antiguan-based LIAT is owned by the governments of Antigua and Barbuda, Barbados and St Vincent and the Grenadines, with minority shareholdings belonging to other regional governments and LIAT staff. Hutson noted that LIAT had suffered substantial losses in the last two years.
“LIAT should probably look at the experience of REDjet," he said. "For instance, there is a demand for special pricing, holiday and family specials and so on.
“There’s also a lot of excess capacity on the aircraft. So LIAT needs to look at some of the things REDjet was doing and adapt them into its model. LIAT also has variable pricing but doesn’t market it.”
Mr Hutson cautioned, however, that if LIAT tried to go the way of low fares in these days of increasing fuel prices, its operating costs would skyrocket: “Caribbean Airlines (CAL) got off because of heavy fuel subsidisation by the Trinidad government.”
Indar Weir, who is president of the Travel Agents Association of Barbados and a candidate of the opposition Barbados Labour Party, said that REDjet had not created much new business in the market.
He described REDjet as a "newcomer" that had failed to last a full year. "They created some new traffic, but it was basically because of a high level of cannibalism, where it was eating away at the customers of the existing airlines,” Mr Weir told Caribbean Intelligence.
He said any new customers would have come mainly from among the curious, those who had never travelled before, and those with very little to spend on air fares or accommodation.
“I recognise that there is a place for a low-cost carrier. The Caribbean deserves better air fares, but the model must be examined carefully. It cannot be all things to all people,” he said adding that, in his view, governments should not subsisidise private firms.
Entertainment promoter Kamal Clarke, who co-founded carnival costume band Berger Boyz in Barbados, said that despite the rising costs of travelling to party at Trinidad’s February Carnival, he believed the presence of REDjet had been partly responsible for a big influx of Bajans to neighbouring Port of Spain.
“Last year I travelled for $750 and this year it was $250. I honestly think it’s as a result of REDjet. Every event we’ve attended [at Trinidad Carnival] we’ve been seeing Bajans,” Mr Clarke told Caribbean Intelligence©.
LIAT also benefits from subsidies, although not to the level of Trinidad's support for CAL. The Antiguan-based carrier sometimes gets international assistance when it comes to replacing outdated aircraft.
Barbados’ George Hutson explained to Caribbean Intelligence©: “The United States and Canada may see it as a developmental thing and make concessionary soft loans or otherwise to LIAT for new aircraft. But government, contrary to popular belief, is not in there putting in money to meet LIAT’s monthly operating expenses.”
Mr Hutson said in March that the Barbados government had been working on a plan to get REDjet back in the skies. He said at the time that the authorities would be giving the airline a provisional licence valid for one year.
“We are all in this together and have to make sacrifices, and we just can’t throw subsidies into things,” he said.
“There is a role for REDjet to play, but it’s unfortunate they came along at this time. Nobody anticipated that fuel prices would have risen 300% and the cost of oil at US$100 a barrel would be the norm.”
REDjet failed to make the impact of another Irish low-cost airline, Ryanair - the first budget airline in Europe, modelled on US low-cost carrier Southwest Airlines.
Bloomberg Business Week said of Ryanair chief executive Michael O'Leary in 2010: "At the heart of the O'Leary philosophy is the idea that commercial air passengers are not delicate creatures whose repeat business depends on free pillows, blankets, and tea.
"Rather, they are hardy beasts - parsimonious when buying a ticket, profligate once in the air - willing to endure discomfort and indignity, just so long as they get to their destination cheaply and with their suitcases."
REDjet attempted Ryanair's no-frills fare model in a region known for its reputation of luxury and its high individual island charges for every stage of travel.
One of the areas at issue for REDjet had been Caribbean airport charges. Mr Burns had argued that passengers should pay fares no higher than US$50, including government taxes.
“It is ridiculous to see a fare of US$19.98 ending up costing the consumer over US$100,” he said.
Other elements of the REDjet model remain open to criticism.Trinidad’s transport minister says the airline's owners and operators of REDjet misread Caribbean culture in cutting out all the “extras” to flying.
“People want meals, baggage and everything else for the low price,” argues Devan Maharaj, adding that REDjet expected CAL to “roll over and play dead and not respond to the airline’s marketing and pricing strategy”.
Former Trinidadian airline executive Conrad Aleong thinks CAL is unlikely to examine a low-cost model after REDjet's troubled history.
“The market here is too small and people do not have the disposable income required to fly around the region,” he said.
Mr Aleong, who was once chief executive of CAL’s predecessor BWIA, notes that service charges at airports are high, as are the costs of aircraft maintenance and paying airline staff, hampering the survival of a low-cost carrier.
“Pilots and attendants don’t come cheap and they are unionised,” he says.
In early June, Antigua and Barbuda's Prime Minister Baldwin Spencer entered the debate, saying his country would not take part in efforts to resuscitate REDjet.
Then came the news of REDjet's insolvency. In a statement sent out to regional newspapers, the airline said it had filed "notice of intention to make a proposal" to the company's creditors under the Bankruptcy and Insolvency Act with the Supervisor of Insolvency in Barbados.
June 2012 left REDjet making last-ditch appeals for funding, facing legal challenges over payments owed and facing the loss of its licence in Jamaica.
REDjet entered the market with a flashy campaign, using the “RED” to attract attention and advertising US$20 fares without stating the attached taxes.
As the Trinidad Guardian said in an editorial after the airline stopped flying: “Maybe REDjet over-simplified the high cost of operating an airline in the region where neither aircraft purchase nor lease is inexpensive.”
The paper added that the high costs were harsh realities “which will not yield to flashy marketing campaigns”.
The biggest losers have once again been the Caribbean island-hoppers. In the past, regional airlines have been the butt of jokes created by stranded passengers; everybody in the Caribbean has a tale to tell.
The nicknames they have given to their regional airlines tell it all. BWIA was often jokingly said to stand for “But Will It Arrive”.
Liat’s popular acronyms are “Luggage In Another Terminal” and “Late If At All”. But as the rescue plans crumble around it, REDjet is becoming “late” in quite another sense.