Sunday, December 16, 2012

Caribbean Airlines Chairman: Don’t expect profit soon

(Trinidad Express)    Don’t expect national carrier Caribbean Airlines (CAL) to turn a profit within the next 24 months.

That’s the word from airline chairman Rabindra Moonan.

In an interview with the Sunday Express yesterday, Moonan said the airline had embarked on several initiatives to rationalise assets and turn CAL into a more efficient operation.

Even so, it will be a while before the airline can become a profitable enterprise.

“Caribbean Airlines is at present not performing above the line, but there are many reasons for this situation—funding for the ATR fleet and wet leases to adequately satisfy the demands of the traffic throughout the system are just two instances which have impacted the bottom line. Rest assured, however, that everything is being done to reverse the situation in the shortest possible timeframe,” he told the Sunday Express.

A few months ago, CAL faced what was described as “operational risk” in the face of mounting debt.

On May 4, former finance minister Winston Dookeran disclosed to Parliament that the airline made an unaudited loss of US$52.8 million (TT$339.5 million) for 2011 while subsidiary Air Jamaica recorded an unaudited loss of US$38.1 million (TT$245.2 million) for 2011.

The Sunday Express had also reported exclusively that CAL’s liabilities was about US$100 million, the majority of which was owed to France’s Aviones de Transport Regional (ATR).

Moonan said the airline was meeting its financial obligations with regard to fees to airports, its fuel bill, and it had not defaulted on any obligations.

“We are using any line or length of credit that is available to us. We also have to keep in mind the purpose of the airline, which is to bring people of the region into the country. Now, that money is not reflected in the balance books of CAL, but it would impact on the GDP of the country,” he said.

Asked if the company was making money from its Air Jamaica investment, Moonan responded: “The company is not yet realising any profits from its Air Jamaica operations. On that side of the business, stiff competition from several low-fares airlines out of the US has caused CAL to revisit its strategies and its cost structure, which we are progressively working on in an effort to level the playing field.”

Since the acquisition in 2010, the Sunday Express understands the actual performance for the Air Jamaica operation, from May to December 2010, was a loss of US$21 million “for various reasons” and US$38 million for 2011 (the 2011 figure has to be contextualised given that there was an adjusted jet fuel subsidy from US$1.50 to US$2.34 a gallon).

While Moonan did not give data on the present state of affairs at the airline, he explained that CAL was now rationalising assets.

As part of that operation, CAL is trying to dispose of its Dash-8 fleet. The ATRs were acquired to replace the Dash-8s.

“Caribbean Airlines has experienced some reliability issues with the new ATR aircraft. It must be remembered, however, that these airplanes are state-of-the-art, and CAL is only the fourth airline in the world and the first in the region to operate these aircraft and such teething problems are not really unexpected. ATR engineers are on the ground at Piarco to assist,” said Moonan.

He said the airline did not hope to raise money from the disposal but rather was seeking to reduce costs.

“To operate two separate fleets means pilot training and two sets of inventories. It’s a major initiative to reduce costs,” he said.

He noted the airline was also in the process of reviewing its routes.

The airline has already dropped one route, from Montego Bay to Philadelphia, USA.

“We will look to consolidate flights and run more during the peak periods and less during the off periods,” he said.

“Caribbean Airlines is constantly seeking innovative ways to become more cost-effective in its operations as it moves to become a profitable entity, and that transcends every facet of the operation, from ticket sales to aircraft maintenance.

“A few months ago, executive management presented to the board a number of initiatives aimed at reducing overall costs and included strategies to deal with its direct and indirect competition, revenue generation and plans for greater yield on all its routes,” he said.

Moonan insisted the airline will one day turn a profit.

“The airline will be profitable, but it is almost impossible at this stage to forecast a specific time frame in which such welcome results will be achieved. The signs are there for a better 2013,” he said.

Two weeks ago, CAL was given national carrier status to Guyana.

Moonan said this will further open up more opportunities for the airline as CAL can relocate some of its maintenance staff.

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