Bob Siefert's comments in a recent article affords an opportunity for me to offer a few brief (relatively) comments regarding U.S.Virgin Islands Airways generally and the San Juan air service option specifically. At this critical stage, it is necessary that issues such as those raised in your article be addressed in a reasonably complete manner. While much more can be said on each comment made by Mr. Siefert, I believe that the thoughts offered below will, at least initially, provide valid counterpoints that justify our position that USVIA is both a necessary and practical avenue of development for the V.I.
First, I am pleased to say that Gov. Turnbull and selected members of his senior staff have, in fact, been considering a proposal that I have again submitted regarding the establishment of U.S. Virgin Islands Airways (USVIA) — a territorial airline. This however, is not exactly a "renewed" effort for I have, as a matter of record, maintained a continuous dialog with every administration since the Luis era, as well as with numerous other highly regarded public and private sector individuals.
From my perspective, the level of careful and qualified discussion and interest that has been exhibited by the Turnbull administration suggests to me that the seriousness of the V.I. air transport problems is finally being afforded the critical level of executive thought that it warrants. I am hopeful, and, in fact, confident, that the Turnbull administration will fully recognize the critical role that it must play in reversing the very real negative spiral that is systematically embracing the territory, and take the bold, necessary, and economically sensible steps to reverse that trend.
Secondly, it is very easy to make claims and references regarding Air Jamaica and Air Aruba "…losing millions of dollars…" for their respective owners. Such comments underscore a very shallow level of understanding of the dynamics of regional air service and its impact upon the general economy of the community. I will not pretend to be an expert accountant and cannot attest to the claims of severe financial "losses" imposed on their owners/communities by Air Aruba and Air Jamaica. There are many accounting and strategic business games that highlight organizational "losses" for many competitive, businesses, or other reasons. For example: Is Air Jamaica really losing millions; or is Sandals Resorts (both owned by Butch Stewart) really making millions – or is there some middle of the road answer? Are the economies of Jamaica, or Aruba, better or worse off by having the presence of Air Jamaica (controlling almost 40% of the airline capacity to Jamaica) or Air Aruba in the air service infrastructure of the community – or would these tourism dependent economies (like ours) be best left under the care of American Airlines? Are their financial problems, assuming the "losses" are real, a factor of management, procedures…, or is it some other issue beyond the control of management?
When such issues, and many more, are explored and analyzed to the level that we have entertained them in the USVIA development analysis and justifications, the answers appear to very readily justify the existence of these carriers in terms of the direct and indirect economic impact on their communities, AND for the competitive credibility they effectively assign to their communities. In addition to their validity as business entities, these carriers impose an air service and economic balance upon their communities which minimizes the opportunity for capacity or airfare abuses by foreign major air carriers as assures the competitive position of the community in regional tourism. At Global Tours and Travel our agents can get a traveler from Miami to Aruba for $300 round trip, or for $550 (if you're lucky) we can get him/her to the VI. Where would you go…? Did Air Aruba facilitate this scenario? Definitely YES!
Thirdly, as for subsidies, I have and will always encourage the V.I. to avoid this scenario. Paying subsidies to a major carrier to provide air service is a kiss of death for a tourism destination like the V.I. For starters, subsidies will: 1) further establish a stranglehold on the community by the airline(s) involved; 2) does not improve the overall competitive posture of the destination; 3) tells the travel marketplace that the destination is essentially not in demand; 4) demonstrates a total lack of local confidence in the tourism product; 5) is expensive, and will get even more so as time goes by; 6) gives the major airline a perfect way out when the territory no longer wants to, or can, pay the required subsidy.
The V.I., which in my opinion has an excellent product to offer the domestic and international travel marketplace and does not have to further line the pockets of a major airline to obtain the service required. If there is a need for better V.I. air service, as we know there is, then invest in yourself and establish the air service infrastructure that assures the V.I. a key position in determining its economic destiny.
Finally, regarding the San Juan connecting option, as a part of its effort to establish a V.I. territorial airline, USVIA Management understands, and has already evaluated, the potential for traffic "feed" to the V.I. through the San Juan hub. We have concluded that this is not a practical or competitive avenue through which to develop the core V.I. territorial tourism product. Briefly, there are a number of fundamental, technical and market driven reasons for this:
* V.I. Leisure Market Dilution: Puerto Rico is a major leisure market that effectively competes with the V.I. in virtually every aspect of travel consumer taste and, in fact, offers even more amenities to the traveler, at a lower price and higher convenience level than the VI under any travel scenario. Consequently, any specific marketing effort related to developing the VI travel market through Puerto Rico will yield much less that the anticipated results AND simply contribute marketing dollars to the already extensive Puerto Rico tourism promotion budget and the P.R. tourism product.
* Long haul leisure travelers, especially on the relatively short vacation packages that characterize the Caribbean travel market, are averse to complicated or expensive options on any travel itinerary. Connecting travel essentially conjures up negative images of missed connections, lost bags, or reclaimed bags, transfers to other airlines, mechanical or weather delays, smaller planes, etc. Given the option, the leisure traveler will opt for a convenient nonstop or direct routing, on a large pure jet aircraft, at a reasonable price, to his final destination — as close to the beach as possible!
* If the market demand for additional inter-island service between St. Croix were readily evident and financially practical, the service would be readily introduced by American Eagle or some qualified competitor. At the yields that American and American Eagle enjoys with their Caribbean dominance and presence in San Juan, it is our opinion that, was additional capacity justified by demand, the additional service to St. Croix, the service would be provided. Further, if the demand for such inter-island service were perceived by other major airlines (United, TWA etc…) as something in great in demand by their Caribbean bound passengers, if is our opinion that some element of competition would be structured by these carriers to effectively compete with American.
* American Airlines and its commuter partner, American Eagle, dominate the Caribbean long haul and inter-island air service markets. With American Airlines' redefinition of its San Juan hub to lesser active status with respect to jet service East of San Juan, its American Eagle component will become an even more aggressive inter-island air carrier if/when competitively contested. Accordingly, any attempt to significantly and meaningfully compete directly against American Eagle will:
1. Require a very high level of operational, fina
ncial and managerial resources
2. Require immediately establish marketing alliance with other major carriers serving San Juan which would reduce optimum yields as frequent flyer mileage redemption programs would have to be honored, thus reducing the number of revenue seats and the true revenue base of an inter-island service. This, in turn, will require even greater financial and managerial resources to absorb these additional costs to effectively compete with American Eagle — in a market that does not fundamentally, or even significantly, address the core air service needs of the VI territorial economy, the long haul air tourist.
The V.I. Must Maintain its V.I. Tourism Product Identity for Optimum Benefit
1. The VI air travel market — St. Croix and St. Thomas/St. John –market is best developed through the development of a VI Territorial tourism product identity. Identifying the V.I. tourism product through the Puerto Rico leisure market channel will certainly, and always, minimize the appeal of the V.I. territory and product.
2. St. Croix, in particular, because of the need to aggressively and uniquely market this potentially lucrative market, is best developed through an aggressive and appealing V.I. Territorial destination strategy that enhances, not dilutes, its appeal to leisure travelers.
Promote the V.I. as a unique Tourism Product, Not as a stepchild to San Juan.
1. We cannot, and should not, identify the excellent V.I. tourism product through another competitive leisure avenue such as a San Juan by "connecting commuter service" and expect that our economic best interests will be best served in any reasonable manner. That thinking, in my opinion, is flawed, and will relegate the V.I. to permanent status as a stepchild of Puerto Rico.
2. Dedicate the V.I. tourism and resort marketing leverage to a long-haul territorial airline that is focused on total territorial development, and that directly addresses the fundamental air service needs of the territory, its residents, and its visitors in a convenient and competitive manner designed for long term success.
3. Work aggressively and cooperatively with the USVIA executive, operational, and marketing management team to reasonably and effectively get what the territory needs and deserves in terms of air service accessibility.
* The V.I. must, and can, effectively compete with Puerto Rico (a tough enough job in itself) and be resigned to living off of its (Puerto Rico's) left overs.
In closing my brief comments, let me note that since 1984, I have taken every opportunity to present the concept and business plan for the establishment of an operationally and financially sound territorial air carrier and have been willing to expose my myself, and USVIA, to any (and virtually every) form of public and private forum and scrutiny. The cast of characters that have taken their best shot at derailing the fundamental operational and economic assumptions and conclusions that form the nucleus of the USVIA business plan includes regional, national, and international experts (among whom I include myself) and is long, distinguished. We have consistently proven the validity of the USVIA concept and business plan as a practical long-haul territorial air service solution for the V.I. and its tourism product.
The "quick-fix" air service formulas that have been imposed upon the territory over the years have failed and will again fail if re-attempted in some modified and likely more expensive (to the territory) format. The USVIA formula represents the best and most likely to succeed formula for effective, economically stimulating, and successful long-term V.I. territorial air service.
The V.I. has an excellent tourism product which can be effectively marketed and sold in the domestic and international tourism marketplace – anytime – if we had a distribution system (airline) that would allow the product to be properly and competitively distributed. But until we all really believe that to be true, and stop hoping and begging for someone else to give us something … because we have nice beaches, resorts, and shopping …, I'm afraid the direct and indirect economic costs to the territory in present and future values will be far, far, greater than any financial assistance that could ever reasonably be provided to USVIA to assist in its establishment.
There is a long future of very exciting development ahead of the V.I. – all islands – and in my professional opinion, it would be foolish at this time for us to again focus on anything but the excellent and unique product that is the U.S. Virgin Islands and establishing the air service infrastructure that will allow us to successfully position ourselves among the very best and most competitive destinations in the Caribbean …and global marketplace.
USVIA is the answer to the economic riddle that V.I. has been avoiding for too many years. It's time step forward, not back, in addressing the economic issues that affect the V.I.
Editors' note: Ralph J. Blanchard is the founder and CEO of U.S. Virgin Islands Airways, Inc.
