American Airlines, Uber Air and a New Battle for the Airways

American Airlines is set to expand its offerings within the Caribbean. First announced back in May, the expansion plan will see eight new non-stop routes, direct from locations in the United States to destinations across the region. Although the company is not alone in expansion plans, with Southwest Airlines and JetBlue having undergone expansions in recent years, its plan does represent one of the most substantial recent upgrades in capacity.

More flights are always welcome but many people in the Caribbean will wonder whether American Airlines’ plan will really change anything in the industry’s operations in the region. Is there any prospect that this upgrade could be a game changer for reducing the high cost of flights to and from the region? If not, what alternatives might we look forward to?

An Unwanted Holiday Extra

The Caribbean has long been a region notorious for the high price of airfares. This can be particularly frustrating given that many tourists to the Caribbean arrive from North America and Europe, with an abundance of airlines there offering flights at budget prices. Even allowing for the volatility of airline profit models, invariably consumers in these major markets can find their desired flight at a cheap price.

As with any regional market, there are local factors in the Caribbean that have an effect on price. Some of them, like the fact that the 30 territories which form the region are dotted among a mass body of water, will never change. Yet in other areas, such as the expense caused by red tape and outdated processes on the ground and in the air, there is room to effect change; local assets, like Saint Lucia’s planned upgrade for Hewanorra International Airport, offer leverage to drive it across the airline industry.

American Airlines’ new plans have been met with much fanfare for the carrier that first began operations within the region in 1971. However, the structure of the entire airline industry that serves the Caribbean needs to change. More flights increase the number of passengers but do not change the pressures placed on tourism providers.

Uber, But Not As You Know It

The commercial airline industry faces new competition from disruptors keen to carve out a market niche by doing things differently. At the forefront of this change is Uber with its air transport service.

Uber Air is seeking to bring an aerial ride-sharing network to passengers within cities, employing fleets of small, electric VTOL (vertical takeoff and landing) aircraft. In many nations around the world, the distance between a major city and an airport means Uber Air will likely remain a short journey service, similar to how its popular ride-sharing app for cars has seen Uber emerge as the ‘de facto’ taxi business of choice around the globe.

Within the Caribbean, Uber Air and businesses like it could offer something more, over time emerging as a real and substantial alternative to challenge the dominance of commercial airlines. Right now Uber Air is in its early days, with plans to launch in just three cities: Los Angeles, Dallas and Melbourne, Australia.

The initial aerial ride-sharing vehicles will have the capacity to fly only 60 miles (including reserve capacity). In view of the relatively short distances between islands in the Caribbean, Uber Air would be able to connect islands on day one of operation, were it to set up shop here. What’s more, with the advance of technology, it is anticipated that the capacity of air vehicles will increase in the years ahead, thereby lengthening the distance that could be covered in a single flight.

Uber is today a commercial giant in its own right but it retains the reputation of an innovator, offering something fresh. Its strong patronage among 18 to 30-year-olds means it has significant brand recognition among a consumer demographic that is set to grow its purchasing power. Highly tech literate, this generation will emerge as a key audience for Uber Air as commercial flights are set to begin in 2023.

It’s the Journey, Not the Destination

The addition of new flights by American Airlines in the region, and new modes of flight like Uber Air globally, won’t cure all existing frustrations around the air industry. There are also broader factors that influence the high cost of flights. 

In this environment, it’s easy for airlines to be the lone target of critique. Yet where public authorities have pursued revenue guarantees with airlines that create an imbalance in the airlines’ favour, the airlines can hardly be blamed for seizing upon an enticing deal. In this area, governments are accountable to their citizens, and the airline industry within the Caribbean, for letting airlines have their cake and eat it too.

Disruptors alone won’t bring about a more even playing field. Although Uber’s popularity as a ride-sharing app has been a success for its shareholders and customers, its arrival has wreaked havoc in many transport markets around the world where traditional taxi services previously reigned. 

Nobody would decry innovation; nor can established businesses expect to maintain their market share forever, but optimism for the future must be tempered by the knowledge that the failure of public authorities to properly plan for it can result in a regulatory nightmare.

In summary, greater diversification in this market means that both consumers and tourism providers have more choice over which airline business receives their dollars and support. For generations the Caribbean family has been dependent on airlines to deliver tourists to the region. Now, as we look to 2020 and beyond, there are clear signs that locals will have a greater opportunity than ever before to control their journey.