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Don't Believe Airline's Tears

EDITOR, The Tribune

Recently we have had a river of tears cried over Bahamasair by everyone from the Minister of Tourism, the Chairman and the CEO of Bahamasair and most recently the auditors, PricewaterhouseCoopers.

The current fad is to lean on so-called State-Owned Enterprises (SOEs) which are essentially any form of business engaged in by government.

The implication is that government ownership and/or control of anything is bad. The converse is that private ownership and control is best. Both beliefs are flawed. The current pandemic has laid bare the falsehood that the public sector should quit the commercial landscape.

Just as SOEs rely on government for survival, many privately owned businesses would be bankrupt were it not for government waivers, favours, tax concessions and outright custom.

Around the world the assets of SOEs are worth $45 trillion according to the IMF. That is equivalent to half of global GDP. SOEs are present in all countries, including the USA. We have ZNS, they have Voice of America. We have the Bahamas Development Bank, they have the Small Business Administration. The much-admired Singapore Airlines is government owned.

Because the private sector didn’t find them to be profitable, the government had no choice but to create SOEs to provide basics like water, electricity, transportation and even hotels.

And though everyone says these businesses should be privatized, very few Bahamian investors are knocking on the door to take them off the government’s hands.

It seems that those who bash government the most about state ownership of businesses, are often the first ones seeking treasury bailouts, handouts and subsidies whenever they face headwinds.

After the tragedy of 9/11 in the US, their airlines and many others around the world went, cap in hand, to the public treasury seeking state aid. The same is true in this pandemic. Billions have been doled out in the US and around the world and little mention is made of the fact that there is a clause in the contract that provides for government ownership of these airlines if they can’t pay the money back. But nobody complains about that.

The pandemic has hit Bahamasair hard, yet few support further subvention to Bahamasair to keep it afloat. They don’t want our direct tax money from the Treasury (whence it should come in the pandemic). No, they want to raise already prohibitively high ticket prices on those of us with little choice to get around the Family Islands.

At this time, Bahamasair should be a catalyst to promote domestic tourism and in so doing allow more of us, for the first time, to explore our own country.

And now the lament from Bahamasair’s boardroom is, don’t blame us, blame the gurus at PricewaterhouseCoopers. They told us to do it.

The story being peddled by Ministers, the Chairman, the CEO and now their accountants is that domestic ticket prices haven’t gone up in eight years, so an increase is long overdue. And besides, it’s just $20.

Bahamasair must decide it if wants to act as a commercial airline or if it wants to be a utility charging only to recoup costs.

It is hard to see how PricewaterhouseCoopers could have, with a straight face, justified a price increase on the basis of ticket prices holding steady for the past eight years.

The US Bureau of Transportation Statistics reported last year that airline ticket prices have actually gone down in the last 10 years. In 2010, the average ticket cost $392 versus $359 last year, an eight percent drop.

The airline industry has slashed ticket prices while simultaneously piling on so-called ancillary fees. They charge for bags, they charge for food, they charge to reserve a seat on the plane and then they really hit you when you have to change your travel dates.

Most egregiously, many don’t refund the taxes and other fees built into the ticket if you have to cancel the flight. It’s understandable that the ticket is non-refundable, but the taxes should be. The treasury only collects for passengers flown.

And now they make it sound like Bahamasair has just miraculously discovered bag fees. Child, please.

On flights to Miami the first bag may be free, but they have been charging between $45 and $125 for extra bags for a while now, plus special fees of over $100 for overweight bags and on items like television sets.

The same policy applies domestically, only they come with the added bite of VAT.

First bag free is the norm, not the exception, for airlines all over the world.

So, spare us the crocodile tears about Bahamasair reluctantly having to charge bag fees so that they can keep up with the airline Joneses.

The Board of Bahamasair must run the business to match the marketplace, not abuse the marketplace to fit their business model.

And here’s a novelty straight out of the JetBlue and Southwest playbook. Reduce the fares and, low and behold, the number of people on each flight will go up. It’s called price elasticity.

Better to have 100 people on a flight paying $100 each than just 50 people on a flight paying $150 each.

Bahamasair should finish cutting the fat on the cost side then maybe we’ll believe their tears.

THE GRADUATE

Nassau,

June 21, 2020

Comments

moncurcool 1 month, 2 weeks ago

After the tragedy of 9/11 in the US, their airlines and many others around the world went, cap in hand, to the public treasury seeking state aid. The same is true in this pandemic. Billions have been doled out in the US and around the world and little mention is made of the fact that there is a clause in the contract that provides for government ownership of these airlines if they can’t pay the money back. But nobody complains about that.

Please tell us what airlines in the Bahamas have gone to the government with cap in hand asking for bail out money? Which Bahamian airlines, other than bhaamasair, has the government of the Bahamas even considered giving subsidy to? I'm getting sick of these stupid statements. Many private airlines in the Bahamas have had to deal with the unfair playing field of a national airline subsided by the government and they are able to turn a profit, coming into business long after Bahamasair started. Time for Bahamaasir to step up it game an stop being a drain on the treasury.

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Dawes 1 month, 2 weeks ago

From what i remember Bahamasair has received over $500 million in subsidies from the Government (and this was over 10 years ago so no doubt is more). Based on the size of the US economy this would be the equivalent to a US carrier being given almost $900 billion. Please show me where this is happening? Yes companies may need some subsidizing, but not to the amount the SOE here need. The rest is just a plea to not have to pay the market price for a ticket and expect others to pick up the tab, however no doubt his letter writer will also complain about the amount in Tax they have to pay, without realizing that part of the reason is so Government can fund these SOE.

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Porcupine 1 month, 2 weeks ago

We keep making a distinction between SOEs and the private sector. A business is a business. There can be justifications for giving incentives to businesses, publicly held or private, for many valid, socially useful reasons. The same expertise and talent that successfully runs any profitable private business could be had by governments anywhere, to run their (our) businesses. That we have politicized everything here, absolutely everything, is the sole reason why many, many enterprises here fail. Were a decent manager given the power to hire and fire according to performance, we would see an immediate turnaround of that enterprise. Remember now, what seems to be forgotten. You don't necessarily need Bahamian expertise alone, to benefit the greatest number of Bahamians. I am all for looking out for Bahamians, but haven't we had it all backwards, insisting on Bahamians to fill every position, regardless of qualifications or track record? Can anyone seriously argue this point? As well, the climate of political interference into every aspect of life here discounts and distorts the "level playing field" that should dictate how things are done fairly? How far do we have to go to illustrate this claim? Bank of Bahamas, BTC, NIB, Water and Sewerage corporation, and on and on. That we allowed ourselves to be so distracted by the false differences of the FNM and PLP is what has allowed us to lose sight of the ultimate goal; to make The Bahamas a better place for all Bahamians. At this point in time, who among us can say that The Bahamas has succeeded in this quest?

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