BWIA’s difficult year — 2002

The year 2002 was a difficult one for national carrier BWIA, as it dealt with, among other things, the aftermath of the September 11, 2001 terrorist attacks on the US, which saw falling yields and collapsing traffic volumes, in addition to the seizure of  two aircraft and an ultimatum from government to lower production costs or risk losing government aid.

2002 in fact proved to be one of crisis for the entire airline industry, as practically all carriers suffered significant losses with the total industry losing US $31 billion for 2001 and 2002. This wiped out all the profits produced by the industry since 1945. In the airline’s 2002 Annual Report, it was revealed that the year began with January’s revenue and net profit/loss on target. However, the Carnival season in February turned out to be surprisingly poor, primarily due to major shortfalls of 14 percent to 28 percent off target on North American routes, with most traditional tourists staying at home. March saw temporary improvement. However, in April and May, revenues fell by approximately seven percent. The first half of the year ended with June coming in at 23 percent to US $5.5 million below the June 2001 figure. Revenues were also recorded at US $10.9 million less than the comparable period in 2001.

BWIA Chairman, Lawrence Duprey was quoted as saying that the anticipated global slump of the last quarter of 2000, deepened immeasurably by 9/11, had alerted the airline’s management to a need to redefine the airline and to move toward a lower cost operation that could compete effectively in the new industry environment of lower fares and new service expectations. This transformation/restructuring, he stated, would be the focal activity in 2002 and would be largely completed with the January 28, 2003 emergence of the lower cost Business Model 2003. “But even this radical restructuring would itself be shown by May 2003 to have been inadequate and the company would find itself relying on financial support from the TT Government to stave off bankruptcy and continue operations,” Duprey noted. However, he commended BWIA’s management which he said performed to a “higher level” than several other larger airlines. “That BWIA was still in business at the end of 2002, when several other international airlines had shut down, is indeed remarkable,” he maintained.

Duprey revealed that the company had adopted several survival strategies which included fleet rationalism, voluntary management salary cuts, reduced service frequencies on soft routes, rationalism of catering, reduction of travel agents’ commissions, was well as reductions on duty travel and associated operating expenses. “It is BWIA’s objective to reduce its operating costs to US 8 cents cost per available seat mile (ASM) by December 2003,” he explained. According to Duprey, by January 2003, the airline had achieved something of a “rebirth” that is best seen in the scrutiny of the operating cost of the company. “BWIA still has the capacity to become increasingly more efficient without significant loss of our unique character and selling proposition,” he asserted. He added that investors would view the anticipated recovery of the industry with a renewed confidence that the new operating Business Model of BWIA is well suited to maximise on the limited opportunities that present themselves.