The Caribbean’s Transportation Problem

A competitive transportation network isn’t just good for citizens wanting to visit family and friends throughout the region or play tourist in their own backyard, it’s also vital for business and economic prosperity. But good routes require substantial investment and this has long been the sticking point in a region where existing operators are already over-stretched, governments have little to spare and overseas investors are wary of taking on the financial risk.

Airline issues

In recent months, Antigua-based carrier LIAT has become the poster child for airline woes. The cash-strapped provider, which services 15 destinations across the Caribbean, is struggling to maintain operations in the face of mounting debt, operational losses and poor sales due to rising ticket prices. In an effort to balance its books, LIAT has asked several of its hubs for Minimal Revenue Guarantee deals and also called on its four major stakeholder governments in Antigua and Barbuda, Barbados, Dominica and St Vincent and the Grenadines to contribute to a US$ 5.4mn emergency bail-out. For its part, Saint Lucia has so far been reticent to fund LIAT’s recovery, with the government saying any investment would be conditional on a restructuring of the company and that there needs to be more competition in the market. 

Prime Minister Chastanet warned stakeholders: “If LIAT remains the same, Saint Lucia will not participate, but if there are these fundamental changes, then we would be very happy to do that. Saint Lucia clearly believes there need to be open skies. We think there are other players in the region that are prepared to step in to service some routes.”

It remains to be seen whether LIAT will be able to stay in the sky but, even if it manages to avoid the threat of dissolution, the airline serves as a cautionary tale for other providers facing the same concerns. Government subsidies may have propped up LIAT while the airline continued its loss-making routes, but capital subsidies are a short-term solution that ignore deeper issues such as the uneven relationship between international carriers and destinations.

Last month, regional leaders met to sign the CARICOM Multilateral Air Services Agreement. Designed to level the playing field for CARICOM-owned airlines, the agreement removes restrictions on routes, capacity and traffic rights and, according to CARICOM, will pave the way for increased intra-regional travel and more cargo options for both exporters and importers.

CARICOM Chairman and Prime Minister of St Kitts and Nevis, Dr Timothy Harris, struck a cautious note however, urging citizens to manage their expectations and pointing out that LIAT’s problems are not new to the region. He said: “We have to be careful that our expectations are reasonable. It is well known that for a very long time air transportation within the Caribbean has had its share of problems. And we have had different airlines; whether it’s LIAT, BWIA or others, they’ve gone through their own periods of restructuring and adjustment.

“There is, within the region, a strong commitment to finding an affordable and efficient means of transportation that supports our integration efforts and that continues to be a work in progress because some of the issues are very deep, very structural and require a thoughtful approach.”

Travelling by sea

Millions of tourists descend upon the Caribbean by air every year but, for locals and businesses, the water can offer a cheaper way to connect. The islands have various shipping routes but passenger ferries have typically been neglected and travelling by sea is still not a viable option for many. Plans for a regional ferry service have been debated and discussed for over a decade with minimal progress but have now come under scrutiny again as LIAT’s predicament forces Caribbean leaders to examine affordable alternatives to airlift.

CARICOM Heads of Government attended a two-day Intersessional Meeting in St Kitts and Nevis in March, during which they examined the possibility of a regional ferry service. Among the issues discussed were the cost of a fast ferry versus slower vessels and security concerns given the Caribbean’s high crime levels. The meeting also created a joint private and public sector body, to review the current situation and make recommendations. The committee’s work will include drawing up estimates on cost following discussions with operators.

At the conclusion of the meeting, Chairman Dr Harris said: “We discussed the possibilities and various options going forward vis-a-vis private sector engagement in the transportation sector. We are committed to delivering a competitive transportation industry to the region and to ensure that the transportation would be affordable.

“We are now looking at some considerations as to what is the best model, and it is not just a question of buying a ship; how will they sustain themselves? You have to address all the logistics and other issues pertinent to finding the model that would be self-financing or at the very least not create a fiscal problem for those contributing to them.”

Key to growth

Poor transportation impacts every aspect of Caribbean life. Without well-maintained and affordable routes, agricultural producers cannot make a dent on the region’s soaring food import bill. High fees dissuade visitors from travelling throughout the islands and spending their tourist dollars. Lack of transport to other destinations limits people’s access to educational opportunities and jobs. In short, the ability to get around is directly linked to all the conventional markers of economic progress. 

Both ferry and air services have a part to play. The LIAT debacle has shown how dangerous dependence on air transportation alone can be, but there’s been slow progress in establishing ferry routes with concerns over the high level of subsidies that would be needed to make them financially sustainable. In 2012 Trinidad and Tobago announced that a Barbados-based consortium would operate a fast ferry service through the Eastern Caribbean with stops including Saint Lucia but the routes were never realised. Again, in 2014, Grenada floated the idea of a southern Caribbean service with an initial investment of around US$ 5mn needed to get it up and running. This, too, failed to come to fruition. With ferries in the spotlight again, optimistic stakeholders are carefully watching the latest discussions hoping for solid progress this time around.