Bahamas Air Holdings Ltd.

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Bahamas Air Holdings Ltd.

P.O. Box N 4881
Nassau
Bahamas
Telephone: (242) 377-8451
Toll Free: (800) 222-4262
Fax: (242) 377-7409
Web site: http://www.bahamasair.com

State-Owned Company
Incorporated: 1970
Employees: 680
Sales: $66 million (2004 est.)
NAIC: 481111 Scheduled Passenger Air Transportation; 481211 Nonscheduled Chartered Passenger Air Transportation

Bahamas Air Holdings Ltd., or Bahamasair, is the national airline of the Bahamas. The airline's fleet of eleven aircraft consists of several Dash 8 turboprops and a couple of mid-range Boeing 737 jets. Based at Nassau International Airport (NAS), its scheduled route network connects twenty destinations, including service to Florida. About 1.5 million passengers fly the airline every year. While not known for its profitability, Bahamasair appears vitally important to a country that is heavily dependent on tourism.

Oil Crisis Origins

Bahamasair was formed in the early 1970s to fill a void left by the withdrawal of major airlines from the local market. British Airways stopped serving the Bahamas in 1970 due to the high cost of fuel resulting from the Arab oil embargo. Pan American Airlines would follow suit in 1973 for the same reasons.

Bahamasair was not the islands' first airline. Bahamas Airways Ltd., which had been incorporated in 1936, had also ceased operations in 1973 in spite of a five-year bailout attempt by the British Swire Group. Yet another similarly named airline had been launched in 1968 to provide low-cost service to Europe. Called Air Bahama (International) Ltd., it was sold to Loftleidir in 1969 and renamed Air Bahama in 1976.

Realizing the importance of tourist traffic to its economy, the government of the Bahamas formed Bahamasair in October 1970 as a state-owned enterprise. It was launched with start-up capital of just BSD 9 million.

Bahamasair took over the operations of two small, relatively new airlines, Flamingo Airways (established 1971) and Out Island Airways (formed in the late 1960s). As Jack Ball detailed in an article for Airliners, Bahamasair operated a motley fleet of several different types of smaller aircraft, as well as a pair of BAC 1-11 jets.

The airline called on the expertise of Aer Lingus, the Irish state airline that had developed a specialty in providing technical assistance to new airlines in smaller countries. One of the four Aer Lingus consultants, Michael Hayes, was named managing director of Bahamasair in August 1976.

In the mid-1970s, Bahamasair experimented with an amphibious service to Cape Eleuthera while also launching a Nassau-Atlanta route. However, its ambitions were temporarily scaled back in 1976. Bahamasair subsequently focused on developing the Nassau-Miami route, records R.E.G. Davies in Airlines of Latin America Since 1919.

The first of the company's mid-range Boeing 737 airliners entered the fleet in the late 1970s. West Palm Beach, Orlando, Newark, and Philadelphia were added to the schedule in 1984 and 1985. In the late 1980s, Bahamasair began flying to Washington Dulles and Miami. On the latter route, the company faced only limited competition from Eastern Airlines. Though important to the local economy, Bahamasair would be unprofitable for decades. It managed an operating profit of less than $1.5 million in 1986.

In November 1988, Bahamasair took over a charter program for Princess Casino Vacation from failed Braniff Inc. Bahamasair soon became the leading carrier to the Bahamas following the bankruptcy of Eastern Airlines in March 1989, leapfrogging Delta Air Lines in the process. Trans World Airlines also cut its service from New York to the Bahamas.

A New Look for the 1990s

In December 1989, Bahamasair introduced a new pastel color scheme reflective of the island's warm beauty. The airline took delivery of two new Boeing 727 airliners, costing $2.6 million, at about the same time. In 1989, the airline also spent $1.9 million to upgrade its Boeing 737s.

Bahamasair entered the 1990s with 600 employees according to one count. It flew to 20 destinations in the Bahamas as well as a handful of cities in the United States. Bahamasair faced enormous competition on the Newark, Philadelphia, and Washington routes and closed them in 1990 as a cost-cutting measure. This freed up planes to bolster service between Nassau and Miami and on domestic routes. The company lost $15 million on revenues of $50 million in 1990.

In the early 1990s, the carrier built its fleet around the 50-seat, de Havilland DHC-8 series 300, a modern turboprop aircraft suited for island hopping. The first few of these models were leased; the airline also placed an order for five Dash 8s worth $56 million. A variety of other aircraft supplemented the fleet, often on a short-term lease basis.

In January 1991, the airline retired its Boeing 737s and Hawker Siddeley 748s. The switch to the Dash 8s left Bahamasair with no jet service to the United States until a Boeing 727 was leased in August 1992. The carrier suffered from a general slowdown in the aviation business due to the Gulf War and a worldwide recession. High fuel costs increased the burden.

The country's tourism ministry launched a promotional campaign for the Out Islands in 1994. Bahamasair participated by improving its service to the Out Islands from Nassau and Freeport.

A proposed merger of several of the Caribbean's airlines, including Bahamasair, Air Jamaica, BWIA, and LIAT, was discussed throughout the 1990s but never finalized. Such a deal would have saved money on marketing and maintenance. The region's carriers were generally unprofitable and Bahamasair was no exception.

The government of the Bahamas was preparing to privatize several state-owned enterprises, including Bahamasair. The state proposed bringing in a private sector partner while assuming the carrier's existing debts.

New Management in 2000

A new management team led by managing director Paul Major took over in January 2000. By the end of the year, he had announced the ambitious goal of attaining the airline's first ever profit within three years.

Cost-cutting would not be simple, particularly trimming the workforce. Unions staged a two-day sickout in March 2000 that grounded 82 flights and cost the carrier more than $200,000.

In June 2000, Bahamasair entered a ten-year, $15 million contract with Sabre Holdings Corporation for passenger reservation service and other technologies. According to the airline's chairman at the time, Frederik Gottlieb, the carrier was aiming to improve all aspects of its customer service. The company was also exploring code shares with other airlines as a way to boost traffic and revenues.

U.S. airlines curtailed their services to the Bahamas after the September 11, 2001 terrorist attacks. Bahamasair increased its Florida routes to fill the void and to help shore up tourism. However, revenues for 2001 fell $10 million to $61 million.

A restructuring plan was announced in November 2002. It proposed to cut 150 employees from the staff of 716 and to focus on higher volume destinations such as Freeport, West Palm Beach, Orlando, Miami, and Haiti. A twice-weekly Nassau-Havana route was inaugurated the next month using Boeing 737s. These flights were made in conjunction with tour operator Scand American.

Bahamasair had lost a reported BSD 338 million in the 30 years since its founding. Its managers were happy to report one telling statistic—during all that time the airline had not suffered any fatal accidents.

Company Perspectives:

Once formed, the airlines' mission was to serve the Bahamas and its people. There were six objectives set out by Bahamasair that were deemed to have vital roles in the efficiency of its services. The Airline was to serve as the National Flag Carrier and promote the countries' image at home as well as abroad. To provide efficient services throughout the Commonwealth in a cost effective manner. To provide a competitive scheduled passenger, charter and freight service to support commerce and promote the Bahamas Tourist Industry at a profit to the airline. To provide efficient high quality fixed base operations to facilitate and promote general aviation to and within the commonwealth at a profit to the airline. To provide employment opportunities for Bahamians within the framework of government policy. To contribute foreign exchange earnings of the country.

Key Dates:

1970:: Bahamasair is formed.
1976:: The airline focuses on developing a Miami-Freeport route.
1994:: Bahamasair features services to Out Islands.
2000:: The company's new management is led by Paul Major.
2004:: A code-share arrangement with US Airways is announced.

The U.S. invasion of Iraq prompted more Americans to choose the Bahamas as a vacation destination, since it was nearby and perceived as safe. However, major airlines boosted their capacity to the Caribbean at the same time, reported the Flight International. Losses in 2003–04 were halved from the previous fiscal year, to BSD 13 million. Revenues were about BSD 65 million.

A long-awaited code share agreement was announced in August 2004. US Airways became Bahamasair's partner in the deal, offering new access to such gateways as Charlotte, Philadelphia, and New York (LaGuardia).

The company sought to increase its revenue base to give it some chance of profitability in light of considerable fixed costs. Bahamasair was planning to expand its service throughout the Caribbean regions with two new Boeing 737 jets. It was also eyeing second-tier destinations such as Raleigh, Cleveland, and Richmond, Virginia. At the same time, the Caribbean was beginning to attract budget airlines from the United States, bringing new competition to Bahamasair from the likes of Airtran Airways and Spirit Airlines.