Fix Caribbean Airlines Ltd (CAL) first.That was the mandate from Finance Minister Larry Howai yesterday after he announced CAL's bottom line has crashed to an approximate US$110 million loss according to 2012 unaudited figures."It's in the region of $700 million," Howai said in the Senate. This includes a US$70 million loss and a US$40 million fuel subsidy cost for CAL and its Air Jamaica operation.
He later told reporters it was a "significant loss and a concern." Howai said, however, that Government expected a restructuring plan being implemented would significantly reduce losses "during the course of this year."He also made it clear Government intended fixing CAL first before responding to associated regional complaints.Replying to Opposition questions on yesterday's Senate agenda, Howai said CAL was still closing 2012 accounts and audited figures were not yet available.
However, he said, preliminary estimates on unaudited figures indicated the company had incurred losses of US$70 million.Howai said in the past two years some costs were incurred due to pilot-training plus losses with the Air Jamaica and London routes.He said CAL had inducted five ATR aircraft, 2 B767s and 10 B737s and also did training for 80 pilots previously employed with Air Jamaica.
He said foreign pilots were also employed on short-term contracts. Also, Civil Aviation had recommended CAL used Boeing and other qualified pilots to fly alongside local pilots until they had the necessary experience.CAL had to enter contracts to source the necessary training and also suffered from lack of qualified nationals to assist with the 767 aircraft, he said. No suitably qualified or current pilots were able to fill posts held by foreign pilots either, he said, noting CAL had advertised for that.
CAL's Big Losses
Howai said the fuel subsidy, a total of US$40 million, applies to Air Jamaica and CAL. The fuel subsidy, which was the same as last year, would end in 2015 and CAL had been informed of that, he added. He said a $32 million loss was incurred on the Air Jamaican route, another contributor to losses.Howai told Senators, however, that CAL remained solvent. He added: "Government has made certain provisions for the airline to restructure its balance sheet.
"One of the things they have done is to use a lot of their cash to actually do acquisitions of the planes and I have instructed a new restructuring of the balance sheet where you would need to borrow and replace the cash which was being used. It's better to leverage the assets rather than leave it unencumbered but having the company incurring significant debt obligations."
Howai said that decision was taken by the board a couple years ago. He said Government had received from CAL a restructuring outline to deal with the losses.He continued: "We also intend to introduce significant restructuring of a lot of the routes and we have started that process with AJ and the Jamaican route. We incurred a loss of $32 million on those routes.
"The Jamaican Government has indicated concern with that and we have undertaken to send a high level team to Jamaica to discuss it with them (early June). We'll discuss it with them but as of now we are rationalising those routes to bring down costs."A second major area of cost for the airline was the London route. He said CAL was leasing two sets of aircraft which contributed significantly to the losses and those losses have been terminated. This will significantly reduce the overall loss, he added.
"So I expect we should be able to significantly reduce overall losses within the course of the year," he said.Howai said CAL, while cash-strapped, has assets.He said: "The thing is perhaps the decision made in respect of how those assets will be leveraged and the kind of leveraging we have for the balance sheet was not something that may have been addressed in the way perhaps others may have done.
"As a result of which I think it's not a question that the company is insolvent, the company is in a position to access cash to leverage the assets it has that are unencumbered, so I expect with a restructuring of a balance sheet, as well as other initiatives, we should be able to return CAL to some measure of viability going forward."Howai said he was now tracking CAL's progress with monthly figures
Speaking to reporters prior to Senate about regional complaints, Howai said Government intended taking care of business at home first before it could sit down and talk with anyone else on its problems.He said LIAT approached Government and CAL regarding equity position in LIAT and where T&T could perhaps be a larger LIAT shareholder, as LIAT needed to get new planes.
Howai added: "That has become an issue. I told the Government I'm not prepared to consider any further involvement in the airline industry until CAL gets comfortable and sorted out our CAL issues.