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Is RED Jet Already in Financial Trouble?

 

Tourism and government officials in Basseterre, since the summer of 2011, had been showing signs that they were quite interested in having the airline service the destination, especially given the rising costs, at the time, that were being attached to ticket prices offered by LIAT. LIAT however has always explained that it is the government tax or taxes that are to be blamed for the bloated ticket prices.

The former Texan billionaire, Allan Stanford, who for the past few years has been held in US prison on fraud charges, found out the hard way, just how difficult it is to run an airline in the multi tourist destination Caribbean archipelago.liatt

The demise of Stanford’s Caribbean Sun Airlines and Caribbean Star was just one of the many that failed over the years, after crashing with the harsh financial realities of operating in the island hopping region.

But now the latest airline to make its move to serve the Caribbean, Red Jet, appears to have had an early encounter with the high costs of doing business in the Caribbean skies.

Reports have recently emerged that suggest there are growing signs of financial trouble. Officials have indicated that they are in need of some 8 million dollars, as an immediate cash injection, to avoid having its wings clipped from the skies and to meet what it calls, “its investor mandate’.

A recent report from the Caribbean Media Corporation (CMC) stated that the airline, which is based in Barbados, “has been forced to scale back its operation by cancelling flights between certain markets on some days.”

CMC quoted an internal RED Jet memo, (a copy of which has been obtained by CMC), that RED jet’s Customer Service Manager, Roy Norville, advised that 56 flights “will not be operating and have been taken off sale for commercial reasons”.

The report went on to state that the affected flights are Barbados-Guyana-Barbados Mondays and Thursday’s, from January 16 to March 31, 2012; Barbados-Jamaica-Barbados on Fridays, from January 20 March 31; Trinidad-Guyana-Trinidad on Mondays, from January 16 to March 31; and Trinidad-Jamaica-Trinidad on Sunday, from January 22 to March 31.

In St. Kitts, the Prime Minister, Dr. Denzil Douglas, Tourism Minister Richard Skerritt and the St. Kitts Tourism Authority, were all hoping to have RED Jet introduce a route that would have included both Barbados and Guyana. There is no word however, how the new developments would impact that expectation.

The company had already secured an 8 million dollar injection sometime last year, but back in November, according to CMC, “the low cost carrier’s largest local investor, Ralph “Bizzy” Williams said that eight million dollars invested for operating expenses in the initial months of the business had to be used otherwise.”

Williams added that he and the Irish owners were unwilling to put any more money into the venture as they were fed up with the way their investment had been treated by the Barbados government.
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Since its inception, several aviation officials have expressed the view that RED jet’s model is unsustainable in the Caribbean.

It would appear that only LIAT has the right model for the Caribbean, because despite all its shortcomings, the airline, which was founded on 20th September, 1956 by Kittitian Frank Delisle, has been the only one to keep its planes in the skies. LIAT has managed this, even though its reputation and image have been severely tarnished by its sometimes shoddy customer relations and treatment of Caribbean customers.

For St. Kitts & Nevis, which is still trying to expand its market share, in terms of tourist arrivals, while also seeking to increase its Caribbean traffic, this new development from RED Jet, could prove to be a set-back to the ongoing efforts of the Ministry of Tourism in Basseterre.

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