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Dennis Morrison

Surviving in the travel industry

Dennis Morrison, Contributor

The deepening financial problems, as reflected in record losses by many of the world's major airlines, are posing a serious threat to the growth of the tourism and travel industry.

Not only are the airlines being pushed to raise fares, but they have had to cut seat capacity in order to contain costs as they struggle to reduce losses. This is a reversal of the trend over the last 20 years when cheaper airfares and expansion of airlines fuelled rapid growth in world tourism.

exploded oil prices

As oil prices have exploded to unprecedented levels and intensified the financial crisis in the airline industry, even the giant carriers have been forced to create alliances or undertake mergers to counteract the financial woes.

Delta Airlines and Northwest, both of which operate scheduled flights to Montego Bay, are the latest United States (US) carriers which have embarked on the course of integration. With regulatory approval already received from European authorities and US regulators predisposed to consolidation, this combination seems set to emerge as the world's largest carrier in terms of traffic.

expanding Ja's air access

A few days ago, the pilot groups gave the go-ahead to the deal and, hence, it is very likely that the merged entity will be in operation by year end. It is also important to note that Delta and Northwest have already secured US antitrust approval to operate an alliance with Air France-KLM. Together, these airlines have 25 per cent of the seats between Europe and the USA.

This alliance, therefore, represents a critical potential vehicle for expanding Jamaica's air access to the European travel market, apart from the existing airlift that Delta and Northwest provide to the USA.

The local tourist industry will need to pay close attention to this merger in the coming weeks. Indeed, a proactive stance is essential if we are to ward off possible rationalisation of routes serving the island's markets in the USA or grasp opportunities for increasing traffic. Over the last five years, US carriers have tended to operate surplus air seats to Jamaica. In the new situation, the industry will have to do a more effective job of marketing in the areas served by these airlines, while positioning itself to use the platform to Europe.

The other major alliance being formed involves American Airlines, British Airways and Iberia, which cover 18 per cent of the air traffic between Europe and the USA. This alliance will also allow for better connections and improved flight schedules which could make for more convenient travel from Europe to Jamaica. But the industry players will have to move strategically and with timeliness to explore the possibilities.

The seat capacity taken off the London route by Air Jamaica may be partly replaced through this alliance or that being formed by Delta and others using the American or Delta connections out of the USA. Further, Air France-KLM, Iberia and British Airways could provide the feed to continental Europe which is vital, especially for upscale travellers.

stopover visitors

On another note, it has been reported that Jamaica received one million stop-over visitors in the first six months of the year. This report does not correspond with the official data from the Jamaica Tourist Board which show that the figure was just under 940,000 and hence a correction should be made right away.

Dennis Morrison is an economist and a former chairman of the Jamaica Tourist Board.