Caribbean Sun Airlines announced it is shutting down after three years of operation, citing competition from rival airlines and direct flights major carriers have from mainland points that bypass San Juan. Its 160 flights will begin winding down in a two-phase operation shortly and completely cease on January 31.

Caribbean Sun has watched a restructuring of the Caribbean market in the last few years as airports on the islands extended runways affording the ability to accept larger jets. The restructuring is similar to what has happened with direct mainland service to Hawaii's out islands. The airline pointed to Delta's nonstop service to Martinique, Guadeloupe and Trinidad and Tobago as just one example. A spokesperson said if an airport is not in the middle or finished with its development, they are planning it.

"Competition in San Juan has always been very tough," President and CEO Skip Barnett, who last year expected to launch a major expansion plan, "but recent developments have created a no-win situation for us. Major carriers currently expanding service to the region are increasingly emphasizing nonstop service. The trend toward over-flying San Juan has greatly diminished the strong demand we formerly enjoyed from connecting passengers and the local market is simply too small to sustain a profitable operation."

Competition not only includes American Eagle and others, such as Caribbean Airlines, but other carriers such as Spirit Airlines, which now serves 12 Caribbean destinations.

Another factor in the decision to shutdown, is the recent re-certification of its sister carrier, Caribbean Star Airlines, which will continue operations. It's status being based in a Antigua, which did not meet U.S. safety standards, was the reason Caribbean Sun was launched. Caribbean Star was certified under new Civil Aviation Regulations passed in Antigua and Barbuda by the Eastern Caribbean Civil Aviation Authority (ECCAA). In March 2006, the ECCAA was upgraded to Category One status by the U.S. Federal Aviation Administration (FAA). The recertification last October enabled the carrier to consider broader expansion opportunities, including possible new service to U.S. destinations such as San Juan and the U.S. Virgin Islands.

"When Caribbean Star was launched in 2000 it could not serve San Juan and other U.S. destinations, which of course hindered growth," said Barnett. "Caribbean Sun was launched as a completely separate U.S.-based airline to complement the Caribbean Star operation with its ability to hub out of San Juan and attract what was then a stronger market for connecting passengers. Now that Caribbean Star has the same advantages, we can realize some efficiencies and better focus our efforts."

The move comes a month after Barnett announced that Caribbean Star was in merger talks with Caribbean airline, LIAT. (RAN, December 4, p.5) Negotiations are continuing and could come to fruition shortly.

Both Delta and USAirways (LCC) have expressed interest in the market with the latter planning to launch service, which has yet to occur. Airline analysts are even calling on Caribbean carriers to create one large regional carrier in order to compete. "They need economies of scale," Robert Booth, president of the Miami-based AvMan, told the Miami Herald, adding he believes Caribbean Airline, BWIA's successor could be the beginning. (RAN, September 18, p.6) Caribbean Sun employs 215, the majority of whom (85%) are based at the airline's operational hub in San Juan, Puerto Rico. Thirty two Caribbean Sun staff are based at the airline's corporate headquarters in Fort Lauderdale, Fla. Additional Caribbean Sun staff are based in destinations served by the carrier. Some 195 jobs will be eliminated as a result of the shutdown. The airline's fleet of four Dash 8s and other assets, including its certificate, are part of discussions the airline is having with interested parties. However, they have expressed interest, not in the Caribbean, but on operations outside that competitive venue.

The shutdown will occur in two phases, said Barnette. Phase one consists of the termination of all Caribbean Sun flights between San Juan and Santo Domingo as of January 16. Phase two consists of the termination of all remaining Caribbean Sun flight operations and the closure of the airline's operational hub at Luis Munoz Marin International Airport in San Juan. Caribbean Sun's final flight is set for January 31.

"It's a sad day for us and for Caribbean aviation in general," concluded Barnett. "It's a sad day for our passengers. But, most of all, it's a sad day for our dedicated staff who fought hard to build a great airline."

During 2006, the two carriers initiated several cost cutting measures including the significant reduction of Caribbean Sun's fleet beginning last July, when it announced it would not renew the leases on two de Havilland Dash 8s. In September, it made a further move to reduce its fleet when it announced that between September and January, leases on three Caribbean Sun Airlines Dash-8 100s aircraft would also not be renewed, reducing the carrier's fleet to a total of four. These reductions resulted in the suspension of service. (RAN, September 18, p.7)