The trouble with the Virgin Islands is that the things we need never get done. A few years ago the governor announced that the island of St. Croix needed direct air service and that he was behind the necessary steps to get an airline to serve Rohlsen even if the government had to buy one which cold be operated under our own flag.
I took this at its face value and attempted to identify an existing airline which the Virgin Island government or the Government Employees Retirement System could buy or make a strategic investment in. What turned up from my research was the well-known charter airline World Airways, which was coming out of bankruptcy and had a market cap [the share price times the number of shares] of less than $10 million. This despite having a well known established name and business.
World Airways had been in business for decades as a supplier of passenger and cargo flight services to other airlines, tour companies and the U.S. Air Force. It had well-established systems and revenue to support overhead beyond the potential for flying people into and out of St. Croix. An experienced airline industry executive came on board. The company was on its way back. Its design easily allows the addition of the U.S.V.I. flag.
I tried futilely for a while to get the Virgin Islands government to make a strategic investment if not a buy-out. I could not have predicted the outcome when I made the recommendation. The airline company was one of the major beneficiaries of the Iraq war, and its price per share went up by 500 percent in two years. At the current state of affairs the Virgin Islands cannot afford to buy into World. Air; [but] service for St. Croix is still a priority, at least it is supposed to be.
Again last year a statement came out of the government that a major priority was getting airlines into the island beyond the obvious ones, American and Delta. Okay, I looked for a solution by observing a chart. A plane flying from the States to South America passes reasonably close to the island. An airline doing a stopover on St. Croix has the benefit of access to jet fuel from the island's refinery. South American countries Colombia and Venezuela have their own jet fuel sources. Panama, in Central America, is less convenient This leaves Guyana.
There is a new Guyanese airline, Universal, managed by Guyanese airline industry veterans. It serves Guyana daily and, on a weekly basis, Surinam, Barbados, Trinidad and St. Kitts. On the U.S. mainland, it flies out of JFK in New York and Miami. Universal Airlines is interested in St. Croix. Its minimum passenger load for an economically viable intermediate stop is a guaranteed 80 to 100 persons departing the United States per flight.
Looking at St. Croix, there are three hotels which have the capacity and potential to contract for that minimum on their own: The Buccaneer, the Divi Carina Bay, and the latest to reopen, Carambola Beach Resort. Since the first two have been open for a while and have arrangements, I contacted the Carambola. The idea of direct service pleased its manager, but what happened was a buck-passing exercise. I re-contacted the Universal Airlines business development manager after several months and inquired as to how things were going. I was disappointed to hear from him that Carambola Hotel and the V.I. government had done no follow-through.
Each Universal plane can potentially carry a few times the minimum passenger load. Together Carambola and the appropriate departments should have been able to commit enough to bring the service together. Instead of Tinker to Evers to Chance, the ball went from Carambola to V.I. Tourism to V.I. Port Authority, and then fell to the ground. To continue this metaphor, the Virgin Islands Bill Buckner-ed.
Now we hear from Carambola officials that they want the Virgin Islands to back their casino. My reaction to this is if Carambola wants to get the V.I. to give some support for a casino, show us some goodwill by making the commitment to direct air service.
After I wrote this, I did some more recent fact-checking. I found that World Airways officials had announced that they did not consider their recent upswing in business sustainable. Commercial business is down, and Air Force business is booming but unpredictable. As a result, there has been a price-per-share decline, resulting in a lower market cap. The company's tax benefit from net operating loss (NOL) carryforward has been used up. Now the price is up between 300 percent and 400 percent from what it had been two years earlier. (See the Nov. 24 Yahoo! Finance World Airways basic chart.
If a minority business person wanted to step in and set up a V.I. acquisition company to exchange shares and acquire 51 percent of World Airways, this would be a good time. This would accomplish two things:
– It would provide World protection from taxation (The Economic Development Authority could provide a 15-year tax benefit for utilizing a Frederiksted headquarters.)
– It would allow World to become a minority partner with the major airlines instead of competing against them.
One element of a business plan between the Virgin Islands and World should be the setting up of a jet-fuel trading operation to hedge against price volatility. I can see this being set up as part of a Frederiksted-located Caribbean Petroleum Exchange at the Merwin Building, but that is from another white paper.
Boston and St. Croix
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