Wednesday, May 09, 2012

Opinion/Letter: Flying into a cloud of debt

By John Jessamy

Parent company Caribbean Airlines recorded a loss of TT$39.5 million for 2011. Air Jamaica, the subsidiary, made a loss of TT$245.2 million. Why are we separating the losses of the two companies? The last time I checked CAL was subsidising Air Jamaica to the tune of US$21 million (TT$126 million) per year.

CAL pays the Jamaican pilots, ground staff, meals and other expenses. Therefore, Air Jamaica is a part of CAL. The total loss of CAL for 2011 is a whopping TT$584.7 million.This is in despite of a $2.4 billion revenue intake for 2011, according to the former chairman, George Nicholas. Is that really true, George? How many billions must CAL make before they could show a profit?

How can we believe the Minster of Finance, Winston Dookeran whenever he talks about CAL? We all remembered when he said that CAL was just taking over the lucrative routes of Air Jamaica. What happened really was a complete acquisition, not a merger of the cash-strapped airline. Why the minister was not truthful with us? If he was not truthful then how can we believe him now? The entire population was denied full disclosure of the agreement between CAL and Air Jamaica. Taxpayers must know the whole truth.

The true picture of our losses would drive us crazy. Let us look at the facts. Factor in the anticipated losses on the proposed transatlantic route to London from June this year. Caribbean Airlines has taken a step backwards by opening the London route. The previous BWIA board in its wisdom decided to cut the London route. It was a wise decision.

This route will not make a profit. If we take the cumulative loss of CAL/Air Jamaica of TT$584.7 million and a further $400 million, which represents the London losses, we estimate that the total loss of close to $1 billion for 2012.

But we do not have to worry. The T&T Treasury will be funding the loss. In a recent interview, the Minister of Transport, Devant Maharaj gave the following reasons for CAL remaining in business even though it cannot make a profit. He cited benefits to social and economic development, the role CAL is playing in bringing the Caribbean together, and providing transport for tourists.

All those reasons are political. The ability to make profits does not concern the minister. We must look at CAL not as a money-making airline but look at it for bringing benefits to the Caribbean. Give me a break! The cumulative losses of both BWIA and CAL could establish an entire capital city from the ground up.

CAL should think very seriously of only providing a service to Tobago at an unsubsidised price. If the airline cannot sustain itself, why should the Treasury have to bear the burden? So we stay in the airline business to provide an available aircraft for the senior officials to jet all over the world. There is even talk of opening the Mumbai route!

I have to disagree with an editorial that blamed the losses of CAL on maladministration. If you put the best minds of British Airways, Delta Airlines and American Airlines together to run CAL it would still not make a profit.

There are four factors to consider to make a profit in the airline business: efficient management of people, fleet, finances and attracting customers. Those factors are muted by increased labour costs, volatile fuel costs, dampened travel demand and deregulation. In short, when you are in the airline business, you are literally between a rock and a hard place. Then why are you in the airline business? It is a case of supply and demand. What is needed is to reduce the amount of players in the airline business so that the few who remain could at least break even. Caribbean islands are in the business for the sake of being in business and not for making a profit.

But we can afford to sacrifice the building of much-needed health care facilities, schools and other infrastructure. At all cost, CAL must be in the air. We are also helping our Caribbean neighbour, Jamaica.Yeah right! When will this madness stop!

John Jessamy

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