Dear Editor,
Reference is made to your editorial ‘Caribbean airlines unsettled?’ (SN May 23) and news item captioned ‘CAL facing “operational risk”‘ (May 21) as well as related news reports (SN May 22, 20, 10, 6, 5, etc) that may have prompted the editorial. From all accounts, CAL is facing serious financial problems and there is a blame game under way about who (current board, previous board, recently resigned Chair Mr George Nicholas or his PNM predecessor Mr Arthur Lok Jack) is really responsible for the airline’s huge debt of some TT$350M. But the airline must not be judged based solely on its debt. One must also look at the vital service it is providing for the entire region and how it has improved over the last 20 months.
The TT Finance Minister Winston Dookeran must be applauded for levelling with the public in announcing that CAL is in the red. But he has done a disservice to the airline, its board and management by releasing partial reports of an audit he purportedly ordered into the airline’s finances. It is difficult to assess the performance of the Board appointed in October 2010 by the current government because the Finance Minister has not provided an annual report of all revenues and expenditures as would be carried out in an audit. Instead, he released information selectively. Based on the releases, one does not really know how much revenue was collected annually or the expenses, so one could try to determine the weak areas as well as apportion blame accordingly. Instead, the Minister provided total amounts of the debt and itemized some of it.
As former Chairman Nicholas and current Chair Rabindra Moonan said, the debt must be taken in context – political pressures to expand operations to provide transportation to Caribbean nationals (in several unprofitable destinations) and to bring people from North America to the Caribbean to spend money to boost sluggish economies. In short, while debts are racked up by CAL, the economies of the region benefit with the transporting of passengers who otherwise would face difficulties visiting these destinations.
CAL provides an essential desirable service as an air bridge, and it should not only be rated or judged based on its profitability. As economists have pointed out, nationals who visit the Caribbean, spend about US$2K per head per visit over a two-week period. When the multiplier effect of 5 is used that amounts to about US$10K in the economy, creating jobs and adding revenue to coffers. Using a figure of a minimum of 500K visitors per year for Trinidad alone, for example, would result in a US$5B circular flow in the economy. And add to this the foreign exchange to the treasury and departure taxes (TT$100 per person) as well as landing fees or in-transit taxes (US$7.50 per visit or in transit) and one can see that CAL is adding tremendous monetary value to TT’s economy. Ditto for the other destinations CAL flies to (some 200K passengers to Guyana, for example that add some US$400M in the economy that swells into US $2B with the multiplier effect). It should be noted that CAL is the second largest revenue earner for the TT treasury as well as its second largest source of foreign currency reserves.
In looking at CAL’s debt, one must also look at the volume of passengers moved by CAL and revenues accrued during the 18 months under Nicholas’s chairmanship. The airline said the volume of passengers doubled while revenues almost tripled. Also, the number of passengers flown from Piarco to Tobago jumped some 25% during that period, assisting the sister island’s economy. CAL’s revenues reached a record TT$2.4 B. Not many people are aware of this fact. Had the Minister or the carrier made known its gross receipts and expenditure, people would have a better understanding of CAL’s operations and its importance to the economy.
So while the airline is under financial strain from its debt (it is not clear how much accrued under each board’s or chairman’s tenure), in terms of revenues, it performed well under Nicholas’s tenure as chair (October 2010-March 2012).
Nicholas is a professional and an able administrator and manager. It should be noted that under Nicholas, the airline’s on-time departures improved significantly and the airline has been flying to more destinations than ever before. In addition, CAL introduced Jetpack service, improved duty fee sales, increased Carnival flights as well as cargo flights throughout the region, including Guyana, and increased flights to Tobago making it an attractive tourist destination once again. Nicholas complained that Dookeran would neither agree to finance or allow financing on the cabinet approved US$200M acquisition of the ATR aircraft, a project to which Nicholas is known to have objected. As such, the Board had to use hard earned cash to finance aircraft purchases for expanded operations. Also, CAL took over unprofitable Air Jamaica routes causing a haemorrhaging of its finances. And as Nicholas complained, Dookeran reduced CAL’s fuel subsidies by as much as 50%, half breaking a commitment made by government. A company figures out its cost before calculating a selling price. A retroactive price increase was never contemplated thereby increasing CAL’s expenditures and as such losses.
Under the new chair, Mr Rabindra Moonan, the management has been instructed to cut costs to reduce financial haemorrhaging. The airline announced it has cancelled two of its planned four flights a week from POS to London. The Guyana routes have been profitable and will not be touched. The line Minister for Transport, Mr Devant Maharaj, said he will sort out financing for CAL soon so the carrier will meet its financial obligations. The Finance Minister has also said he will sort out CAL’s debt soon. Unprofitable Philadelphia flights have been cancelled and more flight reductions are in the making, all of which combined will reduce costs and the deficit.
Yours faithfully,
Vishnu Bisram
