Saturday, May 28, 2011

Why Is Trinidad and Tobago Stopping RedJet?

Should Price Be Our Primary Concern?

A couple of months ago I posted about RedJet the new regional airline carrier with a super low fare of $10 USD coming to Trinidad and Tobago.  Because of that post, I think I owe it to readers of this blog to set the record straight.

The most conscise and objective reason offered for the delay in granting RedJet a license to operate in Trinidad and Tobago was written by a regular columnist in the Trindad Express. Mr. Reginal Dumas.


The following is a reproduction of that article entitled:

The REDjet issue

By Reginald Dumas

I haven't been paying much attention to the REDjet confusion; the bassa bassa at Caribbean Airlines has been much more fascinating. But the matter keeps rearing its head, so I thought I would cast a preliminary eye in its direction.

I seem to recall the representatives of REDjet telling the public here that the airline had been approved for service by the relevant Barbados authorities and that, under the Caricom multilateral air services agreement, it was, on the strength of that approval,

automatically entitled to operate commercially into and out of T&T.
There was a time when I knew a great deal about air services--I led this country's negotiating team for about 15 years--but I have forgotten much. Nonetheless, it struck me that REDjet's position, if I am correctly representing it, could not be correct. There is very little automaticity in air services matters. You have to bargain hard for what you want, and you may not get it.

The Caricom multilateral agreement can be found on the Caricom website. In its preamble it defines a Caricom air carrier as "an air carrier which is owned by a company or other legal entity constituted in a Member State in conformity with the law thereof and has its registered office in a Member State, the majority of the shares of which are owned by one or more Member States or their nationals and which is effectively controlled by such State or States or nationals thereof". The language is awkward, but you get the drift.

On this basis, is REDjet a Caricom carrier? It is certainly registered in a member state (Saint Lucia) and has its corporate offices in another (Barbados). But who owns it? Who controls it? A hallowed concept in air services is "substantial ownership and effective control". Does REDjet satisfy that criterion for Caricom carrier status?

But even if it is a Caricom carrier (and it appears not to be), Article 2 of the Caricom agreement states that such a carrier "shall not be permitted to operate within the Community unless it has been issued with an operating licence by a Member State". REDjet, Caricom carrier or not, obviously has an operating licence from Barbados, but Article 2 goes on: "(S)uch a licence does not in itself confer any rights of access to specific routes or markets within the Community." (My emphasis.) No automaticity there.


And there follow several requirements the carrier must satisfy, including Caricom substantial ownership and effective control, and provision of a business plan which must "demonstrate its ability to meet actual and potential obligations for a period of 36 months from the commencement of the proposed operations".

Did REDjet do all that before its publicity about a May 8 start-up date? If so, and in the absence at that time of an Air Transport Licensing Authority board (the entity to handle such matters), who gave REDjet the go-ahead, and on what authority?

I shall mention only two other Articles of the agreement. Article 6 says that "the carrier's application to the aeronautical authority of the other Member State" – in this case, T&T – "(must be) made at least 45 days or such shorter period as may be agreed by the aeronautical authorities prior to the proposed commencement of the service." Did REDjet (which is still to show me it is a Caricom carrier) do this? Were the aeronautical authorities of T&T and Barbados in contact with each other before REDjet's announcements on dates? If so, did they agree on anything and, if so, what?

And Article 15 speaks of tariffs, which among other things must not be "unreasonably discriminatory" (which suggests they could be discriminatory). Could a US$10 fare between here and Barbados be considered so?

The publication Barbados Today of May 16 quotes "well-placed sources" in Barbados as saying that T&T, in not having yet given the green light to REDjet, is breaching not only the Caricom air services agreement but also Articles 6 and 7 of the Treaty of Chaguaramas, the T&T/Barbados air services agreement, and the Association of Caribbean States (ACS) air transport agreement. Quite a mouthful.


Article 6 of the Chaguaramas Treaty sets out the objectives of the Community, all of which, in my opinion, are constantly either violated or insufficiently promoted by all members of the Community. Article 7 deals with non-discrimination, and states in part that "any discrimination on grounds of nationality only shall be prohibited." I wonder how many Barbados immigration officials are familiar with that Article? And what is REDjet's nationality?

As for the ACS agreement (I haven't read the T&T/Barbados bilateral, which I'm told I negotiated), it too insists on substantial ownership and effective control, which must be vested in an ACS member state or states or associate member(s) and/or its or their nationals before authorisation can be granted for air transport services.

And REDjet really must tell us more about itself. What is its relationship to Airone Ventures Ltd? Who owns the latter? What is the breakdown of shareholding? What is its relationship to Digicel, for which its founder Robbie Burns used to work? Why did it seek national carrier status in Jamaica in 2007? What happened? Why? Who owns REDjet? Who controls it?


• Reginald Dumas is a former head of theTrinidad and Tobago Public Service.

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