The Trinidad and Tobago government on Monday announced that it would end its fuel subsidy to state-owned Caribbean Airlines Limited (CAL), ending an issue that had been heavily criticised by other regional governments.
Finance Minister Larry Howai at the presentation of Trinidad's TT$61.3 billion national budget said the subsidy, which was estimated at US$40 million last year, would cease in a matter of weeks, effective October 1.
Howai said CAL must move towards the adoption of a financially sound business model for positioning the airline in targeted segments of the global tourism market.
CAL is owned 16 per cent by Jamaica.
"The new board of Caribbean Airlines Limited has completed the first phase of a revised business plan for the airline to achieve financial viability. To this end, effective October 1, 2013, I propose to discontinue the fuel subsidy which the airline currently enjoys," he told legislators.
The fuel subsidy has been a source of conflict within CARICOM. Prime minister of St Vincent and the Grenadines, Dr Ralph Gonsalves, said at the July summit of heads that it was a violation of CARICOM trade rules.
Gonzalves, who chairs the shareholder governments of the competing regional airline, LIAT, said they had agreed to provide a summary of a legal opinion to Trinidad Prime Minister Kamla Persad-Bissessar regarding the "unfair" subsidy, saying the smaller Antigua-based airline did not want a fight with Port of Spain on the issue.
He called the fuel arrangement an "impermissible" subsidy and floated the possibility of having the issue adjucated by the Caribbean Court of Justice.
CAL, he said, was paying US$50 to US$60 per barrel for fuel, whereas LIAT was paying US$130 to US$150 per barrel.
In his budget presentation, Howai said that the subsidy given to CAL for the Tobago airlift would remain.
"These factors have been incorporated into the business plan, which I expect to receive on September 17. I have been assured by the board of Caribbean Airlines that the removal of the fuel subsidy will not impact the ticket-pricing policy," Howai told legislators.