CAL takes US$70 m. hit
And if the fuel subsidy is added, the total loss would be $704 million, Finance Minister Larry Howai conceded yesterday.
However, he said the airline remains solvent.
Howai yesterday faced a barrage of questions on the State-owned airline. And People’s National Movement (PNM) Senator Lester Henry said he was “astounded that the minister could describe as solvent a company which cannot cover its costs and no money in the bank’.
Howai replied that the company may be cash-strapped but it had assets.
“Perhaps the decisions made in respect of how those assets would be leveraged and what kind of leveraging you have for the balance sheet were not addressed perhaps in the way that others might have done,” the minister said.
He said the “preliminary” unaudi≠ted” figures showed US$32 million of the $70 million loss was incurred by the Air Jamaica route, and another major part of the loss was also incurred on the London route.
“On the Jamaica route, it has cut flights to Jamaica and on the London route, it has terminated the wet-leasing arrangement. He said he expec≠ted to “significantly reduce the losses of the airline during this year”.
He said the airline used a lot of its cash in the acquisition of planes. He said he had instructed that a new restructuring of the balance sheet be done where the airline would have to borrow and replace the cash which had previously been used. “It is better to leverage the asset rather than leave it unencumbered while having the company incurring significant debt obligations.”
On the issue of CAL vice-chairman Mohan Jaikaran issuing instructions for 19 complimentary tickets to be approved for a Mother’s Day function in Toronto, Canada, in which he is a promoter, as well as his instructions to upgrade persons from economy to first-class, Howai said he had asked for and received a report.
“But when we went through it, there were a number of questions which the Ministry of Finance had that we have asked for further clarification on before I take anything to Cabinet.
“When I left earlier today, they (Ministry of Finance) had not yet received all the information required…. I expect that by tomorrow, I would have the additional information I need…to facilitate a discussion on the matter on Thursday at Cabinet,” he said.
He said one contention put forward by Caribbean Airlines was that it was normal practice, predating this board. He said CAL said this was an arrangement for marketing of the airline and the arrangement was that part of the cost would have been picked up by the company itself and part by the marketing people. They have submitted some documentation to support that, but there were additional questions. (Express)