CAL narrowly staved off having 11 planes seized – fired Chief Financial Officer
(Trinidad Express) Caribbean Airlines Ltd (CAL) narrowly averted having 11 of its aircraft seized by hurriedly securing a US$50 million (TT$320 million) loan from First Citizens bank to cover outstanding arrears owed to the International Lease Finance Corporation (ILFC).
This claim has been made by fired CAL chief financial officer Shiva Ramnarine in a report dated August 20, 2013, to Finance Minister Larry Howai and Minister in the Ministry, Vasant Bharath.
The ILFC is CAL’s largest lease provider.
According to Ramnarine’s report, the near catastrophe that was kept quiet occurred in March this year when ILFC served a notice of default on CAL demanding payment or stop flying the 11 Boeing 767-800 aircraft.
Seizure of the aircraft would have led to chaos and cancellation of flights as the 11 Boeing 767-800 make up a major part of the airline’s fleet.
Checks on CAL’s website show the airline’s fleet is made up of 15 Boeing 767-800, five ATRs 72-600 and two Boeing 767-300 ER.
The Express understands it was Ramnarine, (who was terminated on August 4 this year after it was alleged he acted contrary to proper procedures) who negotiated with ILFC head Jorge Garcia to settle outstanding payments.
As a result the default notice was quietly withdrawn.
The Express learned it was also agreed that the default notice would not have been brought to the attention of the T&T Civil Aviation Authority (TTCAA) after discussions between Ramnarine and Jorge.
And while CAL last Saturday denied any knowledge of the notice of default, a copy of the document dated March 15, 2013 obtained by the Express shows that the total amount that was due and owing under the 28255 lease was US$252,923.48.
The notice also listed the sum of US$1,889,531.05 as being owed under leases 28233, 28234, 28235 and 28246.
Details of CAL’s near catastrophe are also revealed in a March 21, 2013 e-mail sent from Ramnarine to former acting chief executive officer (CEO) Robert Corbie and then chairman Rabindra Moonan who was subsequently fired. Excerpts from the e-mail obtained by the Express stated: “I was served a notice of default and demand for payment indicating seizure of all 11 aircrafts (sic). However, Jorge retracted the notice after I spoke at length of our plan and our intentions to transform CAL. It should also be noted that Jorge agrees with our position of stabilisation and transformation which includes reducing frequencies and as such our position to not acquire a 767 at this time.
“Jorge on behalf of ILFC and in the spirit of business partnering will negotiate with us to take back aircrafts (sic) if needed as we reduce frequency. As he indicated, the survival of CAL is important to ILFC as a result of our business and history together.
“He assured me that he will not be informing the TTCAA of the notice now that it has been retracted.”
In the e-mail, Ramnarine also disclosed that ILFC questioned the rationale behind the purchase of an aircraft from China.
He said: “One area he (Jorge) articulated as a sore point was CAL’s counter-intuitive position of stabilisation and transformation but purchasing an aircraft from China at two times the price.
“At the loaded cost of the Chinese aircraft ($31m) ILFC could have sold two aircrafts (sic) to CAL for that price.”
Also discussed at the four-hour long meeting was cost reductions and business practices, Ramnarine said.In response to the e-mail, Moonan on March 22 wrote: “Well done.”
But while Ramnarine was commended for avoiding an embarrassing situation, the interim CAL board, appointed by Howai, listed the handling of the matter as one of the issues for terminating him during his probationary period.
Ramnarine was terminated following a report compiled by acting CEO Capt Jagmohan Singh, vice-president of human resources Charmaine Heslop Da Costa, corporate secretary Nalini Lalla and board director Patricia Kong Ting.
The report stated: “Shiva efforts on this front would have been offset by a recommendation which he fully supported of the leasing of a third 767 aircraft in exchange for one 737 by the lease company. In this regard, Shiva failed to support this recommendation with the financial justification. He also verbally represented to the chairman at this time that it would have been detrimental to the ILFC relationship if the lease was not signed because of previous late payments on the company’s lease commitment.
“Shiva further represented that the decision to lease a plane was within the authority of management of the company. The latter assertion was incorrect as only the board has the authority to make decisions on lease or purchase of airplanes. Also, the negative fallout of the late payment was eventually managed without the lease of the plane recommended.”
The report also listed several alleged shortcomings on the part of Ramnarine in relation to decision making and handling of matters relating to CAL. Some four-months after Ramnarine was sent packing, the Express learned that his termination is not sitting well with Bharath.
The matter was only brought to the attention of Prime Minister Kamla Persad-Bissessar on December 7. The Express learned that Ramnarine previously had raised concerns over Kong Ting’s involvement in management issues and also reiterated his concerns by letter dated August 20 sent to Howai and Bharath.
In the 23-page document obtained by the Express, Ramnarine responded to each of the allegations and gave other reasons why he may have been wrongfully dismissed.
In relation to the intended seizure of the aircraft, Ramnarine specifically outlined details relating to the matter as follows:
• ILFC visited CAL with intent to serve notice for the seizure of aircraft. This was communicated in advance of the visit;
• The acting CEO (Corbie) and chairman (Moonan) asked that I meet with ILFC to determine what could be done, if anything;
• The notice of seizure was given to me and a copy was being despatched to TTCAA;
• Based on my four-hour conversation with ILFC it was agreed to withdraw the notice and to work with CAL on payment terms and to look at possible ways to assist CAL with its fleet. CAL’s position was that there was excess capacity of 737s and a need for a third 767;
• An e-mail was sent to the acting CEO (Corbie) and the chairman (Moonan) both of whom thanked me via e-mail for averting an embarrassing situation and seizure of aircraft and operational shutdown;
• On the said e-mail I conveyed ILFC suggestion which was for CAL to consider the swap of a 767 for 737 at approximately $100,000 less in monthly lease payments and the potential to return an additional 737 at a reduced penalty cost;
• An executive management meeting was called by the then acting CEO (Corbie) to discuss the proposal;
• Management agreed with the proposal and the then acting CEO (Corbie) requested that the CFO put a proposal to the board in light of the request for a third 767.
With regards to claims that only the board has the authority to make decisions on lease or purchase of aircraft, Ramnarine said the relevant board minutes will reflect that a request for approval was made and granted.
Ramnarine has also taken issue with claims that he issued a transformation programme advisory contract to Ernst&Young accounting firm without tender.
The contract, the Express learned, was issued before Ramnarine joined CAL in February. He is also challenging that his rights of natural justice were infringed because he was not given an opportunity to respond to the allegations although he was on probation.
The Express learned that Ramnarine’s claims are corroborated in testimonials submitted by Moonan and former government minister Jack Warner and are to form part of Ramnarine’s legal challenge against CAL.
In fact, listed in Warner’s testimonial are details of a September 23, 2013 meeting held with Howai to discuss Ramnarine’s termination from CAL. The meeting, the Express understands, followed a September 19 e-mail that was sent to Warner from Ramnarine seeking his intervention. Similar e-mails were also sent to other Cabinet ministers.
As to why Howai opted to meet with his former Cabinet colleague over the matter is unknown.
An attempt by the Express to get answers about the meeting was unsuccessful as Howai did not respond to e-mails or text messages on the matter.
Instead, the list of questions sent to Howai by the Express was forwarded to CAL’s communications department for response.
In Moonan’s testimonial he extensively explains the role Ramnarine played in ensuring that the 11 aircraft were not seized. Commenting on the issue last week, Bharath confirmed that the matter was brought to his attention.
“Mr Ramnarine did contact me in relation to the termination of his employment. I did look at some of the details between the board and Mr Ramnarine. He seems to be extremely well qualified. There may be some personal issues between him (Ramnarine) and members of the board. I have not had an opportunity to investigate the matter fully with the board.
“I spoke to Minister Howai about the matter and indicated the situation warranted some further investigation by us both. The last thing I would want is for a young professional who worked internationally and is now building a career in T&T to be disadvantaged because of a poor decision.
“Unfortunately, both Minister Howai and myself have been extremely busy with several other matters. I fully intend to have a discussion with him (Howai). We had an initial discussion on the matter but we have not reached a conclusion,” Bharath said. On the issue of the threatened seizure of the 11 aircraft, Bharath said he was not aware.
“It was mentioned to me that Mr Ramnarine was responsible for making sure that the airline continued,” he said.
Bharath said the transformation plan that is at present being tweaked by the board is expected to avoid similar situations.
Several telephone calls and text messages to Ramnarine for comment on the matter went unanswered.