Is Redjet Failing?

Redjet since its launch of service to the caribbean has enjoyed a rocky ride albeit overcoming many of the initial challenges they faced.  Image source: Clovis Toons (Jamaica Observer)

As far as the service goes however it has to be said that they have made a great impression in the minds of those who have had the pleasure to fly with the low cost carrier.  Not the very least in their pockets. I can readily speak to that since I was able to spend christmas with my family in Jamaica for only US$200 return fare, while checking in two large bags each over 50lbs and carry on two others including me laptop bag.  You can't get that anywhere else to be quite frank.

An interesting thing that caught my eyes on my way back to Trinidad was the fact that I could have played a good game of football or cricket in the back of the plane if I were allowed.  Each of my traveling companions (and there were 12) could manage to control an entire row for themselves.  I saw beyond the comfort however, because I knew straight away that empty seats of that magnitude was bad for business at any rate. 

The service I must admit was top of the line and the staff must be commended for an enthralling experience.  Being a low cost carrier, the familiar hot meal that we have grown accustomed to was available, but at a cost between US$5 and US$10 with snacks, beer, wine and other liquor reasonably priced.  Of course for a three (3) hour flight the savory fill up of Island Grill's juicy jerk chicken would have done the trick for most of us.

source: Redjet

No later than a few days after my return to Trinidad the news was littered with talks about Redjet facing financial difficulties.  This was not surprising as I intimated that I already saw the signs of a logistic nightmare.  Running an airline is not a job for the week at heart because there are so many variables that you have to get right to keep those planes flying.  I will briefly look at the most significant variable assuming operation is in full effect.

Logistics refer to the technical and business optimization of the carriers operation.  The routes, fares, frequency, schedules, deployment has to make economic sense to be sustainable.  Where I think Redjet has gone wrong is with the frequency of the routes.  For example they launched service to Jamaica with two flights per week.  From my observation, and I can back it up with other primary experiences, the trouble with that route is to get a full plane back to Trinidad.  This is a common problem across other routes as well and seem to be the main issue in the airlines operation. 

What they should have done at the onset is begin with one flight to Jamaica per week and assess the demand before making the necessary adjustments.  Then they could dynamically add flights where there are expected peaks in flight demands as it were.

What Caribbean airline has done to tackle that problem is to combine routes much like a taxi would do if they have to pass a particular node (city or town).  There is a trade off with this however because of the cost associated with grounding a plane.  Thus it would take approximately 50 additional passengers to break even and given the low cost model it may take twice that for Redjet to say make a stop in Barbados on a Jamaica-Trinidad route.  So it is not an easy problem to optimize especially since certain key decisions have to be made months in advance.

It is much of a gamble in many cases and it takes a lot of marketing money for the gamble to pay off at the very least.  The chances of having full planes can be optimized through innovative means however and I will discuss one such way.

Last minute specials!  This is not a novel idea but it sits at the heart of optimization of dynamic models.  You do not have much to lose by halving the travel cost on the last day of booking to increase the number of passengers.  The additional weight and fuel consumption are trade offs that can be settled by the final price for those last minute specials.  The usual marketing trick "one seat left" has not worked in my opinion because people are more informed and no longer fall for that.  What they could do as well is auction the seats towards the end to get a better chance of filling them. 

My final recommendation is to scale back the frequency of non performing routes and create innovative ways to sell every seat up to the last few hours.  Do some more market research to find the optimal travel dates in the year and dynamically add service on demand. Lease two additional planes of smaller sizes to handle low performing routes or schedules on the fly.

I wish the airline and their operator success, not only because I have benefited from their initiative but the wider implications of regional integration.