Airline Mergers And The Caribbean

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CaribWorldNews, LONDON, England, Fri. Oct. 1, 2010: Last month the proposal to merge the Spanish carrier, Iberia, and British Airways was given the green light by European regulators. The US$8 billion deal will result in the world`s third biggest airline when complete at the year`s end.

It is one of a number of high profile airline amalgamations taking place on various continents. Others include, in the United States, the merger of United and Continental, and in Latin America, LAN the airline of Chile and the Brazilian airline TAM. The aim in all cases is to create economies of scale at a time of escalating operating costs and falling revenues and the rationalisation of routes and services. There is also a desire in the case of European carriers to offset the rise of some of the world`s newer carriers such as Cathay Pacific or Emirates.

Where this process goes next or what its longer term implications are for Iberia or BA`s routes is far from clear. Willie Walsh, BA`s feisty Chief Executive, who will become Chief Executive of the enlarged group, has suggested that the new company has identified twelve other airlines that it would see as attractive partners. Although the names of these have yet to be revealed, speculation focuses on LAN and Copa in the Americas and Cathay Pacific and JAL in Asia.

Hopefully such consolidation will not damage the growing airlift into the region.

European carriers in particular, after years pursuing high yield North Atlantic passengers saw, during the recession, the need to diversify. One consequence was the provision of increased numbers of seats on long-haul leisure routes such as those into the Caribbean: a decision reflected for instance in British Airways and Virgin Atlantic`s enhanced winter flight schedules into the region.

Elsewhere Copa, the profitable Panamanian airline, is rapidly building route networks linking the Caribbean and South and Central America through Panama City. It is thinking about route development from a regional perspective with the consequence that it will increasingly be able to deliver Latin American visitors into an increasing number of Caribbean destinations and vice versa in a way that circumvents the endless delays and hassle that occurs in Miami. 

There is of course no reason why airline amalgamations should touch these or any other new route developments out of North America. However, there is a general sense that as efficiencies began to take hold, spare capacity is taken out and competition decreases, a merged carrier will, market forces permitting, be able to leverage prices upwards causing either destinations, passengers or both having to pay more over the route.

These are developments that the Caribbean tourism industry needs to understand better given its dependence on the long term strategy of the airlines.

In early October there will be an opportunity to know more. Then Mr. Walsh will set out his vision of a future partnership between his airline and Caribbean destinations when he addresses the Caribbean Tourism Organisation`s leadership conference.  It should be an interesting exchange.

If regional economic integration is ever to become a reality the relationship between Caricom and the Dominican Republic has to improve. In this there is a central role for the private sector. Large companies from Europe and further afield are investing in the Dominican Republic and its companies are moving out into the region and the wider world. If Caricom is not to be left behind  there needs to be more dialogue, better media coverage,  stronger diplomatic relations and an emphasis on addressing outstanding problems in a manner that creates trust. – By David Jessop/ Special to CWNN.

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