[Guyana] TravelSpan keeps eyes on high fuel costs

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[Guyana] TravelSpan keeps eyes on high fuel costs

Unread post by bimjim » Mon Jul 21, 2014

http://www.guyanatimesgy.com/2014/07/20 ... uel-costs/

[Guyana] TravelSpan keeps eyes on high fuel costs
July 20, 2014

Faced with a high fuel bill and the largely seasonal travelling of a bulk of its passengers, TravelSpan Chief Executive Officer Nohar Singh said the airline has been forced to start selling its meals and blankets, previously offered free to customers.

This, he noted, is not going down well with some customers “but at the same time they have to understand the dilemma of the airline industry”. Less than six months when it re-entered operations here, TravelSpan Airlines had complained about high operational costs for flights into Guyana due to high fuel prices, among other costs, which remain a challenge.

A number of other airlines, including US-based Delta Airlines, had cited high fuel costs as a major challenge in servicing the Guyana-New York route. At the time when Delta had pulled out of operating here, they had also complained about Caribbean Airlines which was enjoying Government subsidies from Trinidad and Tobago (TT), thereby creating an uneven playing field for other carriers. However, the TT Government has since cut the subsidy, effective from October 1, 2013.

At the time when the TT Government announced the discontinuation of the subsidy, it said Caribbean Airlines Limited must move towards the adoption of a financially sound business model for positioning the airline in targeted segments of the global tourism market. He added that “the new Board of Caribbean Airlines Limited has completed the first phase of a revised Business Plan for the airline to achieve financial viability”.

Competition good

Meanwhile, Singh said the recent influx of several new airlines operating out of Guyana is good news for the aviation sector as it increases competition, which will aid in business growth. “We need to have competition in the aviation sector since it is a healthy thing, hence, TravelSpan’s re-entry into the Guyanese market,” Singh told Guyana Times on Thursday in an interview.

The CEO disclosed that after the pullout of Delta Airlines, it created a vacuum which forced passengers to pay in excess of US$1300 for a return flight to and from the US, which was indeed unfortunate. He recalled one passenger migrated to the US and after two months, her mother passed away and had to make a trip home and after two months upon her return to the US, her husband passed away but due to the high fares, she could not have afforded another trip. Another scenario, he recollected involved a construction worker who had to travel to Guyana for a funeral and had to pay close to US$6000 for a family of four. “The basis of us re-entering is due to the lack of competition,” Singh added.

He stated that in the aviation business, it is highly regulated whereby airlines were assigned specific routes to operate, owing to the fact it is a costly business.

“The purpose behind that is because it is such a costly business…. The fuel alone between New York and Guyana is about US$60,000…. So the reason for those things was that you regulate an industry that helps to build a country’s economy and serve the people,” he added.

He explained that the airline is about more than just moving passengers to and from their destinations, but rather it also moves goods, services and money. “For every Guyanese retuning to Guyana, the average expenditure income is US$1500 and when you take that and trickle it into the economy is a significant contribution.”

He added that in the context of Guyana, after Delta pulled out of the market, it left one major carrier, but due to the high airfares and the monopoly, TravelSpan made a decision to re-enter the market, and as such, prices have stabilised.

He said too that as a result of the monopoly, there were other entrants into the market within a short period of time, who made a number of false promises.

“US$500 including taxes will never work… we as Guyanese have seen this over and over… we have seen the cheap carriers coming in… we have seen the false promises and the cheap fare, but they do not last.”

Singh said while they encourage competition from an aviation standpoint, the carriers need to also be careful, but suggested that competition, is the only way the airlines will perform better, but more importantly, passengers will have choices. At the same time, he noted that competition must be done with the market in mind, explaining that if there are 100,000 people travelling, then there should be about 110,000 seats with the expectation of growth in the aviation business.

Profitability

On the issue of TravelSpan’s viability, Singh said the travelling public has to realise that “it just can’t be cheap flights all the time… you have to be realistic, you have to be viable”. He added, that the profitability in the airline market in the past has been 3.5 per cent. The margins, he disclosed, are very small. Singh further stated that a major factor in profitability is the seasonal travelling of passengers. He explained that everyone wants to travel in December and July, noting that there is a reduction in the other months.

He said in order for TravelSpan to be in Guyana on a long-term basis, they have to be reasonable and sensible to remain viable. TravelSpan has been in the aviation industry for 19 years, operating in the US, Guyana and Trinidad and Tobago.

Under the stewardship of Singh, TravelSpan has grown over the years and continues to be the “largest producer of air transport passengers from the US to both Trinidad and Guyana”. With a repeat rate of 70 per cent, the airline has established a strong revenue structure, which is complemented by a strong core route structure.

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