Barbados is guaranteeing Cayman Airways a minimum amount of revenue on the airline’s Grand Cayman-Bridgetown route, meaning none of the flights, in the first year of operation at least, can make a loss.
Cayman Airways launched its twice-weekly route to and from Barbados last month.
The airline revealed some details of the deal, which will be in place until October 2024, following a Freedom of Information request from the Cayman Compass, but the exact amounts involved were redacted in the documentation that was released.
The agreement notes that Barbados Tourism Marketing Inc., which represents the Barbados government in tourism matters, guarantees during the one-year period, to give CAL “minimum revenues” for operating the scheduled service.
Those minimum revenues are calculated by multiplying a specific amount of money by the number of scheduled flights operated each quarter. That sum is redacted in the agreement document provided to the Compass.
The contract notes that if ticket sales, minus government taxes and fees, exceed the agreed minimum revenues in any quarter, then Barbados Tourism Marketing Inc. does not need to pay the airline. If, however, they do not exceed the agreed amount in that quarter, Barbados Tourism Marketing Inc. will pay the difference to the airline.
Under the agreement, Cayman Airways must provide the Barbados agency, within 30 days of the end of each quarter, a calculation of the number of flights operated, the ticket sales, and minimum revenues, during those three months.
Minimum revenue guarantees between airlines and governments are common practice within the aviation industry, where they are used as incentives to operate certain routes.
Los Angeles route
Earlier this year, when announcing plans to start the Cayman-Barbados route, officials also said that Cayman Airways would be running a second weekly flight to and from Los Angeles, timed specifically to connect with the airline’s Barbados flight, to enable passengers to fly from LAX to Barbados on Cayman Airways.
The minimum revenue guarantee agreement also took into account this route, calculating a percentage of the pro-rated portion of the LAX-Cayman portion of the ticket if it had an onward leg to Barbados. The percentage amount was also redacted in the documentation released to the Compass.
Officials said at the time that the launch of Barbados and expanded LAX routes would help establish Cayman as a hub for travel between Barbados and North America. They also stated this would enable Barbados to become a hub for European travel for Cayman, as more airlines fly direct from Barbados to Europe than they do from here.
To ensure CAL’s calculations are correct, according to the agreement, the airline is required to provide manifests and other flight documents to the Barbados authorities.
Another document released by CAL following the freedom of information request was a letter signed by Shelly Williams, chair of Barbados Tourism Marketing Inc., to John-Paul Clarke, chair of Cayman Airway’s board of directors.
Noting that she and Clarke had had a meeting “on the sidelines of Caribbean Week in New York” in June this year, her letter was a “formal official request for Cayman Airways to provide air service to Grantley Adams Airport in Barbados”.
She said this was the culmination of their “many meetings over the past months” discussing opportunities for services from Owen Roberts International Airport.
She noted that BTMI was willing to support the service with a minimum revenue agreement, initially drafted by Cayman Airways, and that its marketing team would work with CAL to develop a “very robust promotional campaign”.
The route officially launched with much fanfare on 18 Oct., with the first flight coinciding with the 2023 Barbados Food and Rum Festival.
Speaking on the Cayman Compass talk show ‘The Resh Hour’ in September, Tourism Minister Kenneth Bryan said the deal between Barbados and Cayman was structured in such a way that the route would not make a loss, though he did not go into details of the agreement.
The agreement also dealt with the type of aircraft to be used on the route, stating it should be a “160 seat Boeing 737-8 Max or similar”.
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I traveled recently on the Barbados to Cayman flight and there were only 10 passengers onboard. I cannot see this flight lasting very long. Cayman Airways should be focused on bringing tourists to Cayman, not being a charter airline for Barbados to expand its tourism. They must look at tourism markets from San Francisco, Calgary, Chicago, Phoenix, Las Vegas, Vancouver, etc. Barbados makes no sense.
You are absolutely right. Or put a smaller plane (but with longer range) on that route, but to send a 737 back and forth makes no sense.
What happened to all the visitors from the British Midlands that our Minister predicted would fly to Cayman via Barbados?. Also does the minimum revenue agreement allow for increase in fuel costs and other expenses/.