Flying into profitsThursday, October 22 2009
It is the best of times but it can turn out to be the worst of times for newly appointed president and CEO of Caribbean Airlines Ian Brunton. Best of times in that he was part of the leadership team that saw the airline turn a modest profit in 2008, its second year of operation.
“The airline is doing very well,” asserted Brunton, who flew with the Royal Air Force in 1962 . “The shareholders gave us a remit to take the airline to profitability in three years and in fact we did it after the first year. It wasn’t a huge profit, but we turned the corner, virtually broke even and then made a modest profit in the second year (2008).” He did not disclose any figures.
Best of times in that in the past year the airline, apart from opening up two new routes to South America — Paramaribo in Suriname and Caracas in Venezuela — has increased the Suriname service from four times a week to seven, with Caracas also enjoying daily service. Fort Lauderdale in Florida was opened up and that too, has seen an increase from four flights a week to seven.
Largest capacity increase however is on the New York service. When the airline began operations in January 2007, it was operating a single flight to JFK. Today there are as many as five flights a day sometimes. Although the core service is three flights, there are days when CA operates four and even five flights a day. All in all “it’s a massive increase in capacity,” said the airline boss.
Best of times in that the airline has acquired two additional B-737s, which became necessary with the increase in capacity on the various routes. The airline has also decided to bring back to home base at Piarco heavy maintenance on its aircraft and in so doing, according to Brunton will save a lot of money. “We’re saving as much as US $400,000 on a C Check, by doing it ourselves,” he said.
Brunton, at ease in the cockpit of an Avro, an MD-83 or an Airbus-340, or even an RAF jet, is similarly at ease in his corporate office at Iere House in Piarco. Asked about the cost effectiveness of such a move, Brunton explained that airframe maintenance is “extremely employee costly, extremely labour intensive, but because of that we have that competitive advantage with labour costs.
The worst of times could come this year, which Brunton describes as a “disaster year for all airlines”. He reminded there has been a meltdown in the world economy, which has manifested itself in the reduction in demand in the aviation industry.
“Every airline is facing it. Southwest, which has never had red ink on its bottom line, has now had four quarters in the red. So if Southwest goes south then everybody else goes south. “It happened to us too. It’s a double whammy, not only because of lowering demand, but also because of lower prices, which means lower yields, so although we’re flying more passengers than last year, we have less revenue. That’s the significant difference,” said Brunton.
London slots
Asked about a resumption of London services, Brunton said, “We’re looking at all routes, all possibilities, all opportunities, we’re not going to do London unless it’s going to be profitable.
On whether the airline made a mistake in dropping the London service, he said it was a good decision because it was losing money. He said that on start-up there were two routes losing money — Washington DC by way of Dulles International and London Heathrow.
“We could not afford to carry loss-making routes. We had to be profitable very quickly. When the studies show that the disapora is ready and can sustain us we will go back.”
Brunton was sure the airline could get back slots at Heathrow. “As a new carrier it’s possible to get slots anywhere. As a new carrier you come in fresh and get to the top of the list, but only for slots that are available. We’ve lost the grandfather rights, but there’s no reason why we can’t get slots either at Heathrow or Gatwick, once we apply for them.”
On pursuing acquisitions or on plans to buy into or absorb LIAT, Brunton said this was above his level. “That’s a political thing since LIAT is owned by governments, so the governments have to decide what they want to do,” he said.
He insists that a synergy with LIAT, not getting into any main strategic relationship, could augur well when dealing with manufacturers during negotiations for new aircraft. There’s a lot of economic clout if you’re buying 25 airplanes as opposed to five, he said.
As for Air Jamaica, the consultants recommended that Spirit Airlines be the number one bidder and CA the second, he said noting it was all up to the Jamaican government now.
Flying onions
Captain Brunton, who at one time was chairman of the Pilots’s Association said, “I have nothing against unions.” He believes unions are necessary to keep management on track but he adds “Unions in places like airlines are very professional bodies and they are needed to keep the profession and advance the profession, so they are very essential.”
When BWIA was shut down in December 2006 there were more than 2000 employees on their payroll. On start up CA had 1100 and that is now down to 950.
And future plans? Brunton said his goal was to make the airline the top choice for any traveller in any part of the globe.
“We have to make sure our cash operations pay for our business and we don’t rely on the balance sheet because it is too easy to fund the business through the balance sheet and we’re not about that,” said Brunton. “In the longer term we will seek any opportunity to expand because we need to grow. We’re too small. We need to grow, whether we do it organically or incrementally but we’ll take any opportunity to grow once it looks like it’s going to be profitable.”
And now as he sits at the controls to pilot Caribbean Airlines into the future, Brunton has developed new areas of management such corporate services, fusing information services and finance and corporate affairs which combines the former legal department with human resources and revenue and distribution, a new division,
“We’re looking at things in a totally different way but I think it will make the difference,” said Brunton. “We’re emphasizing the product, manufacturing the product, selling the product and keeping the product in a good condition for people to come back.”
