Lessons for BTC from Bahamas Airways
by Simon
A recent editorial cartoon of MPs bearing a coffin labelled Bahamianization was cute as a caricature but unconvincing as commentary. The cartoon represents a polar extreme from the left. From the right is another polar extreme claiming that Bahamianization has been tried and has failed.
As usual, the truer picture is somewhere in the middle beyond the hyperbole and casual analysis. Certainly, we are not where we want to be, but to deny various advances since independence, of which both extremes are prone, betrays many examples of progress despite the distance we have to travel.
All of which begs the question: What constitutes Bahamianization? Like all strands of nationalism, notions of Bahamianization are often driven by romanticism, ideological purity tests, prejudice and fear. At its most extreme, nationalism can explode into jingoism, xenophobia and racism.
At the heart of nationalism is a sense of identity and belonging to a place and may include political, social and economic nationalism. The highly emotive debate about the future of BTC has triggered various waves of economic nationalism which concern issues of opportunity, ownership and empowerment.
INSTRUCTIVE
But if the issues are about the greater empowerment of and opportunities for Bahamians, the BTC question is not as simplistic as the ardent nationalists suggest. The aviation industry offers an instructive case study in economic nationalism.
In 1968 Cathay Pacific Airways agreed to a partnership with the Bahamas Government in the development of Bahamas Airways as our national airline. The Hong Kong-based carrier was given exclusive rights to a number of important routes while providing the country with deep pockets and expertise in the airline industry, as well as an extensive international travel network.
Cathay Pacific (CP) invested heavily in the aircraft, marketing and training needed to develop routes between The Bahamas and tourist markets like New York and other cities. Once profitable, CP agreed to sell a 25 percent stake to the Bahamas Government at the initial share price of Bahamas Airways, which would have resulted in a windfall profit for the country.
The Bahamas would have had a national flag carrier able to compete with the big American carriers. Today we own 100 percent of a carrier that cannot compete. Is this Bahamian pride and nationalism? With crocodile tears about nationalism, Sir Lynden unilaterally and underhandedly broke the agreement with Cathay Pacific whom he himself courted and brought to The Bahamas.
Our national airline would have been integrated into the global aviation network decades before the more recent wave of globalization, providing guaranteed airlift for our tourist market, business passengers and cargo.
Imagine the possibilities of The Bahamas as a regional hub for Bahamas Airways/Cathay Pacific with direct flights to Latin America years ago, flying directly to many cities in the U.S., expanding our access to European capitals and better linking the country to the Pacific and China.
Sir Lynden and others defended his about-face by saying that Bahamians should fully own the routes Bahamas Airways had been granted. In the event, his waving the nationalist’s banner was a cover for crony capitalism as he awarded the routes to a crony who failed to get his airline off the ground.
SCANDAL
The result was the collapse of the arrangement with Cathay Pacific, a blow to the credibility of the government with investors and a big scandal for the country. The crony airline became known as “the paper airline” and became a laughing-stock.
Sir Lynden’s decision on Bahamas Airways was one of the pivotal issues which provoked increasing dissatisfaction with his leadership, eventually resulting in the break from the PLP of the Dissident Eight and others.
The founders of the FNM and other nationalists who remained in the Pindling government had to take tough and pragmatic decisions early on in the greater national interest of making the Bahamian dream more accessible and advancing the promises of majority rule.
They overwhelmingly and correctly concluded that to expand tourism and economic access and opportunities for Bahamians, and in order to grow the Bahamian economy to fund priorities such as education, that the Cathay Pacific partnership was an exceptional deal for The Bahamas.
Sir Lynden’s decision was tragic. In significant ways it set the country back decades. While it may be difficult to calculate the lost opportunities and economic benefits to the country and the Public Treasury, we know what Bahamasair has cost taxpayers -- now approaching half a billion dollars.
For point of reference, our total national debt today is approximately $4.2 billion dollars. Over the years Bahamasair constantly flew off course with poor service and incompetent management, various scandals and rip-offs, political interference and featherbedding of supporters, as well as wasteful spending.
Four decades after the Bahamas Airways debacle, the country owns 100 percent of a national airline that has been a significant failure in many respects. Is this more preferable than a 25 per cent stake in an airline that would have been more profitable, that would not have cost the Public Treasury the mind-boggling sums expended on Bahamasair, and would have guaranteed airlift into our prime tourism markets?
Then there are the opportunity costs of millions which could have been invested in education, health care, the arts, infrastructure and other areas. In all probability our national debt would also have been lower and our public finances healthier.
RATIONAL
Such rational cost-benefits analysis does not hold the emotional appeal of thumping our chests, waving the national colours and proclaiming that we are the majority owners of our national airline. Still, Bahamian pride must be more than nostalgia, unthinking nationalism and outdated economic thinking.
Surely we cannot fully know what the future of Bahamas Airways would have been amidst the turmoil that has roiled the airline industry over the decades from oil shocks to mergers to intense competition.
What we do know is that Cathay Pacific is still a healthy and competitive airline and that many of Bahamasair’s domestic routes are now in the hands of private fully Bahamian-owned companies that are profitable. The model Bahamas Airways could have followed is a concentration on international routes leaving domestic routes to local carriers with, in some instances, government subsidies to less profitable inter-island routes.
Suppose that in the 1980s The Bahamas was again offered a partnership with an international carrier to buy a majority stake in Bahamasair, with an agreement similar to the proposed BTC and Cable & Wireless partnership?
The agreement would have entailed the Government maintaining a significant though not majority stake, veto power over key decisions and significant board seats. The new partnership would leverage the resources of the well-established airline including extensive capital investments and other resources made available to Bahamasair that it could not access on its own.
The new partnership would also help to integrate the new Bahamasair into a global travel network of expanded routes with significantly better economies of scale in a more competitive global airline industry. Eventually, shares would be also sold to the Bahamian public
If this was the deal on the table, what would those who oppose the new partnership between BTC and Cable & Wireless, have thought and argued? Clearly, one could not plausibly argue that the national interest would have been better served by insisting on a 51 percent stake.
Undoubtedly the airline and telecommunications industries are different. Yet, there are parallels between the Bahamas Airways story and the proposed new partnership for BTC.
March 18, 2011
bahamapundit
A political blog about Bahamian politics in The Bahamas, Bahamian Politicans - and the entire Bahamas political lot. Bahamian Blogger Dennis Dames keeps you updated on the political news and views throughout the islands of The Bahamas without fear or favor. Bahamian Politicians and the Bahamian Political Arena: Updates one Post at a time on Bahamas Politics and Bahamas Politicans; and their local, regional and international policies and perspectives.