That is an excellent question? And it was asked not by me but by someone on a forum on the website www.airlinews.net.

With the millions of dollars the Cayman Islands government have pored into keeping Cayman Airways afloat (sorry I meant in the air) when you read the various answers to the question below, you will see our airline isn’t alone. In fact Cayman Airways hasn’t done as badly as the majority Caribbean airlines.

Why do Caribbean airlines struggle in general and in long haul?

NICHCAGE: I have seen over the years how airlines based in the Caribbean have struggled. Air Jamaica looked like a promising airline, but dealt with many problems. It caused the airline to cut a lot of flights to Canada and the United States, as well as long haul flights to London Heathrow. If I am correct, did Air Jamaica fly MBJ-KIN-LHR-MBJ-KIN? Did Air Jamaica ever fly to FRA?
BWIA flew to the Americas and Europe. If I am correct, they flew to LHR and FRA at some point, correct?
Why do Caribbean Airlines struggle in general? Why did long haul not work for them?

FASTPHILLY: Business traffic from the Caribbean is nonexistent. There are no cities in the Caribbean that have the premium O&D to support long haul flights.

USFLYER MSP: Most traffic to the Caribbean is inbound not outbound; Caribbean carriers have a structural disadvantage to capturing this inbound traffic and have proved to be inept with sales and marketing outside of their home markets…

LIMAFOXTANGO: Politics.

GUYANAM: Really don’t think that one could have accused JM, when it was privately owned, to be inept in sales/marketing.
What is unique about the Caribbean is that its an “Open skies” area. Any one will be allowed to fly in, to sustain the tourist industry. There is no need for code shares or to buy into Caribbean carriers for this reason. The market is free and easily accessed directly by the majors.
70 % of BWIA’s traffic originated from OUTSIDE of the Eastern Caribbean, with only 15% originating in POS, its base. This even though its primary function was to be a VFR carrier and it confined itself mainly to VFR routes. LHR, YYZ, JFK, and MIA. Its forays into the leisure market, working with wholesalers like Travel Impression and Liberty Travel generated huge losses as they couldn’t offer the volume of seats that AA could have, so were paid less per seat.
JM entered the leisure market and got their shirts burned off their backs trying to compete against the majors. Their flights to islands other than Jamaica were a colossal failure. Note that JM was owned by Butch Stewart who also owns the renowned Sandals hotel chain. Sandals has hotels in Jamaica, The Bahamas, Antigua, St Lucia, Grenada and Barbados. The last 3 islands have seen a huge bump in US arrivals due to the presence of the Sandals brand.
Yet despite this Stewart couldn’t make JM work, and when it began to face increasing competition from US carriers it bled money. Like other Caribbean carriers JM couldn’t compete against the majors in the leisure market as US carriers had stronger brand image, more extensive marketing and distribution, more comprehensive FF programs, and the ability to feed their hubs from domestic non gateway cities. AA dominates MIA because of this.
Caribbean carriers got the lowest yielding business from the wholesale operators which dominate leisure travel, so the numbers didn’t work, even when they got decent market share. In times past BWIA had about 30% of the market share on USA to BGI travel, but it was extremely low yielding.
Caribbean carriers are under capitalized, operate in a high cost region due to their limited economies of scale, and aren’t well positioned to compete when B6 arrives with rock bottom airfares. In fact Caribbean hotels face many of the same challenges, despite the popularity of the region as a leisure destination.
B6 can subsidize losses on a Caribbean route, which they incur during its start up phase, as they have an extensive network to feed this. When Caribbean carriers have to match fares they don’t have other markets to offset the losses.
BW (Caribbean Airlines) attempted to run flights to LGW with a 763 fleet. 2 planes so no economies of scale, and the planes were under used as there weren’t enough opportunities to use them. BW couldn’t compete into BGI when some of the biggest wholesalers into that island were either owned by, or had strong ties to VS and BA. So it only did a LGW POS route, which is a small market.
So Caribbean carriers can “succeed” on routes with heavy VFR like JFK and YYZ. In fact BW is one of the larger carriers into JFK, being top 10 among the foreign carriers. They run about 6-7 flights daily out of JFK with very strong loads (70% +) most of the time.
BTW there is decent business traffic on MIA routes. At times BW’s B class is full when their coach is at only 60%.

GUYANAM: (on LIMAFOXTANGO: Politics.)
The biggest money loser among Caribbean international carriers was when Butch Stewart owned JM. This because it had huge losses on its routes into cities like ATL, BWI, PHI, ORD, IAH, LAX and also PHX for the brief period that it flew there. Its yields on those leisure routes were abominable. In fact ORD was the least profitable and had the lowest VFR presence. Even as it ran a daily A321 with strong loads.
Note that AA runs only on weekends from ORD to MBJ, except during the busy winter months when its daily. JM ran an almost daily to BOS, when the majors only service that route to MBJ during the winter. Even they cannot make the numbers work outside of the Dec/Mar peak.
This was Butch Stewart. Not the usual inept governments.

PA747SP: Small fleets (poor utilisation) and a reliance on point-to-point leasure traffic with no effective feeder distribution in the major markets. Compare a Caribbean carrier to say, BA. BA can feed traffic from a large European network onto an aircraft that is being well utilised. The Caribbean carrier has a small fleet that can only fly to a couple of European destinations and then has no connecting traffic.

AWACSOONER: Part of it too is the “island” culture…look at the reviews of airlines like LIAT and InselAir…repeated breakdowns in service, lack of compassion or any sense of customer service, and lack of promptness…and the travelers then take their business to the US airlines.

GUYANAM: (On the above)
LIAT and Insel are irrelevant to this discussion as they are regional carriers, operating as a monopoly in most cases; Their mission isn’t and will never be to become long haul carriers.
AA offers service no better than that of BW. What AA has that BW doesn’t are powerful hubs, and a strong international brand image. Their IFE is comparable (not that good). BW has 154 seats on its 738 planes, vs. 160 on AA. BW offers a better baggage allowance and hot inflight meals, comparable to AAs B class meals. Both carriers aren’t noted for having good ground service. On its FL routes BW can only do O&D on its routes to FLL, MIA, and MCO. AA can feed its MIA hub from flights from all over. No shock that AA dominates the MIA POS route. BW holds its own on the JFK POS, with its powerful VFR market.
Just have a problem at MIA and you will see how cruel AA can be. AA had a crew problem and canceled their flight. Only when passengers began to riot did they see it fit to find a crew to get us to JFK from MIA. They found a crew in one hour after passengers began climbing over the counters to call contacts in NYC to rearrange baby sitting, call employers, etc. Cell phones long dead and recharge stations all occupied. It was as if AAs inability to crew its flights was our problem. I didn’t see that AA was any better than LIAT at that point.

JETWET1: (On FASTPHILLY: Business traffic from the Caribbean is nonexistent. There are no cities in the Caribbean that have the premium O&D to support long haul flights).
Not entirely true, there is business traffic there, it is just so fragmented it’s next to impossible to making a living from it.
(On AWACSOONER: Part of it too is the “island” culture…look at the reviews of airlines like LIAT and InselAir…repeated breakdowns in service, lack of compassion or any sense of customer service, and lack of promptness…and the travelers then take their business to the US airlines.)
I would argue that you are both correct, the hubs in the US really project their dominance over the market, there is also the general feeling in the population that the “home” airlines are second rate, the service may be just as good, the seating more comfortable, it doesn’t matter, it’s a carryover from years gone by, if you’re going to the UK and have the money, you fly BA, it doesn’t matter which class, it enables the wife to tell her friends she is flying British Airways to London, to the US, well any of the majors works, same difference, back when I was really flying around the Caribbean (thanks to my fathers jobs the companies he worked for would fly us out for the summers) it was Pan AM and Eastern, Pan Am always above Eastern but Eastern was acceptable, but it still holds true today, AA/DL have a better cache in the islands than the domestic carriers.
(On USFLYER MSP: Most traffic to the Caribbean is inbound not outbound; Caribbean carriers have a structural disadvantage to capturing this inbound traffic and have proved to be inept with sales and marketing outside of their home markets…)
This is also true in the US, outside of a few select markets in the US nobody has heard of most of the Caribbean airlines, when booking flights they pick whichever US airline they have a loyalty to.

BIMJIM: There really are three basic reasons why Caribbean Airlines (*The National Airline Of Trinidad And Tobago) does not do well, and they are also the same three basic reasons why LIAT and BahamasAir do not do well.
1. As previously stated above, politics. I don’t just mean that politicians get free flights for themselves, family and friends, I mean constant meddling, constant directives, constant interfering, constant stupidity, constant incompetence. The Boards are almost all composed of political appointees who never spent a day in any arena of aviation, and have no idea what a properly run airline should look like.
The politicians and the Board then invariably appoint people to management who are their friends or Party faithful and ask them to “see what they could do” with the airline. Several times a year the politicians are challenged about the high subsidies from taxpayers, and so far have always refused to either respond or make any changes.
Yet – true to the insanity defence – every year they expect that what they did for the last year – the same as they did the year before that lost money – will make a profit.
2. The body of the airline – the employees – bear the brunt of the abuse from passengers who are fed up with the nonsense. As a result – knowing full well that nothing is going to change – the employees become sullen and unhelpful. This just makes things worse, but frankly if I were abused like that every day I came to work I would get sullen too.
3. The fares charged by these national “regional” airlines are high, because of the lack of economies of scale, and the governments (politicians again) use air travel as a cash cow by adding on punishing levels of taxes and fees, to the point where some of the intra-regional fares are exceeded by those add-ons.
While these taxes and fees are hammering the passenger, the same governments (politicians) are also hammering therir own taxpayers on the other side for subsidies for the airline. LIAT is expected to need another US$50 million for the last fiscal year, and Caribbean Airlines (Trinidad & Tobago) will need a similar amount – but that is cloaked as an “infrastructure grant” awarded to Caribbean Airlines annually by the government to circumvent the US ban on direct subsidies of foreign airlines.
On the Caribbean Airlines front, you need only look up the fares on any sector they operate to find fares substantially lower on the internationals than on CAL. And that is the real core reason why CAL does not do well in the international markets, simply because, wherever you may come from, price is usually the deciding factor. What keeps CAL running is the nationalistic fervour found in that country to use their own carrier, almost no matter the additional cost.
But were I pushed to state the problem of the Caribbean regional airlines in one word, I would have to say politics. From there emanates all the stupidity, incompetence, unprofessionalism, favouritism, and lack of innovation which make any airline stand a head taller than its competitors.

ENILRIA: I have a completely different answer. People often miss the single most important thing that drives airline financial success. Point of sale. AA or BA or LH can reliably depend upon securing customers in the USA or the UK or Germany because they have loyalty from those passengers due to the breadth of their product in those cities. Not only can they obtain loyalty, perhaps more importantly, they can get passengers to pay extra because of their frequent flier program or just the loyalty that comes with the passenger using an airline for more than their occasional trip to Jamaica.
Next couple in, #1 the point of sale split on Caribbean destinations is as high as 95% in places like UK, Germany, and most of the USA (outside of pockets in NYC and MIA). That split is way out of line with more balanced places like SCL or MEX where there are plenty of hometown passengers to sell to. #2 Without the point of sale advantage of passengers in their home market, the airline will be a bottom dweller on fares hoping to sell a product to passenger who almost never fly them which means price is the only way to attract traffic. #3 The airlines are designed to be low-yield as that is their political purpose. Jamaica, for example, doesnt need an airline. There’s plenty of service on airlines that don’t need to deal with the point-of-sale problem. SJU doesn’t have its own airline. These islands have their own airline because they don’t want the foreign airlines charging the high fares they can get, reducing demand to the island for tourists which hurts the economy. So these island airlines are basically loss-leaders designed to increase traffic volume which creats jobs and economic development above what would exist if they justt like AA/BA/etc dominate everything. Trouble is that the people footing the bill for these airlines seem to forget that is the mission when the bill comes for the losses, or they have been misled about what the point of such an airline is when they were asked to financially help out.
I’ll add one more thing. I remember way back when AA had a strike and it crippled the Jamaican economy. The cries went up “we can never let this happen again to be so dependent” and money flowed to Air JAMAICA as an insurance policy against it happening again.
People seem to forget that an insurance policy is basically where you write a check to get nothing 99% of the time, and one where you never get back what you put in.

END

I found all the answers very interesting and there is some food for thought for those running our own airline.

I’m afraid in the long haul all Caribbean airlines will continue to struggle – it’s by how much.