CAL under stress

Fails to hand over US$5m pledged to Children's Life FundOwes NP $29m

(Trinidad Express) National carrier Caribbean Airlines (CAL) has not paid its promised US$5 million (TT$30 million) to the Prime Minister’s pet project, the Children’s Life Fund.

On November 30, 2011, CAL chairman George Nicholas presented a replica cheque to Prime Minister Kamla Persad-Bissessar at the official launch of the Fund at the Hilton Trinidad.

Persad-Bissessar donates ten per cent of her salary, while her Cabinet colleagues donate five per cent, to the fund.

Persad-Bissessar had explained that CAL had raised the US$5 million by donating US$5 paid on every passenger flight ticket to the Children’s Fund.

However, the Sunday Express understands that up to last week the payment to the fund was still outstanding.

Chairman of the Children’s Life Fund, Varun Maharaj told the Sunday Express yesterday that while they haven’t received the sum, he understands that CAL was making arrangements to make the payments.

He said he had the commitment of the chairman as well as line Minister Devant Maharaj.

Maharaj said Nicholas was committed to the Life Fund and had even offered to facilitate the travel of certain cases through CAL.

Even as CAL is yet to hand over the US$5 million cheque to the Life Fund, it is also owing fuel provider National Petroleum tens of millions of dollars.

CAL owes NP approximately TT$29 million for aviation fuel.

The Sunday Express understands that CAL usually enjoys a seven-day credit facility for fuel from NP.

However, CAL has been unable to pay the full amount when invoiced.

Instead, the Sunday Express understands the company issues partial payments to sustain the account.

“It’s a standard arrangement with all our suppliers but NP is given first priority as a supplier,” was all Alicia Cabrera, CAL’s senior marketing manager would say yesterday.

Chairman Nicholas could not be immediately reached for comment yesterday.

He announced that the airline had made a TT$200 million profit last year.

The sum, the Sunday Express was told, has built up over the last six weeks as no payments have been made to the account despite an attractive fuel subsidy which the airline has enjoyed since it began operations in January 2007.

NP has declined to disclose information because CAL is a customer.

“We pay them a little at a time but you will appreciate that our operations require fuel on a constant basis. It’s like an account that keeps going up. We might pay TT$5 million this week but purchase TT$10 million. The point is we are supposed to settle it in seven days but it’s never done,” a source familiar with CAL’s operations said.

Transport Minister Maharaj confirmed yesterday that CAL was undergoing financial stress.

Maharaj told the Sunday Express he was aware that CAL had not paid the US$5 million to the Children’s Life Fund and that it owed a considerable amount to NP.

He said last week officials from his ministry met with CAL’s executives “to go through in detail various aspects of its budget”.

Maharaj said the ministry was looking at it in two parts: CAL’s domestic operations and the Air Jamaica operations.

“We are critically reviewing all expenditure in an attempt to rationalize expenditure to make the airline as profitable as possible,” he told the Sunday Express.

He pointed out that critical aspects were a reduction in staff in Jamaica and the removal of food from Air Jamaica’s economy seating.

Further, CAL was even looking at the feasibility of maintaining two brands which he said was costly in terms of marketing.

Given the collapse of REDjet and continued troubles at Liat, Maharaj said, CAL was committed to the serving the region.

“The government agrees that CAL should be run efficiently. So we have to see what efficiencies can be achieved without traumatising employees in any fashion,” he said.

Up to May 2010, CAL paid a fixed price for fuel with the government picking up the slack if oil prices fluctuated. Post 2010, the government agreed to change the price of US$1.75 a gallon to US$1.50 a gallon. The subsidy was maintained by the government and was also extended to Air Jamaica after it was acquired in June 2011.

CAL’s subsidised fuel cost the government TT$56.9 million up to August 2011.

Within the last year, CAL has consistently added new flights and introduced new routes to the region having the fuel advantage benefit compared to its regional competitors.

The high fuel prices caused the Barbados-based low fares airline REDjet to halt operations from Friday night.

CAL’s mounting debt also comes at a time when the airline has been unable to pay for it’s third and fourth turboprop aircraft which it commissioned from France’s Aviones de Transport Regional (ATR).

In November, CAL received the first of nine ATRs, which are expected to replace the airline’s aging Dash 8s.

CAL’s intention with its ATR aircraft are to operate Air Jamaica to Havana, Montego Bay/Kingston shuttle service, Nassau to Grand Cayman and its current Dash-8 operations—the airbridge, Caracas, Barbados and Grenada.

The company was expected to take receipt of one ATR a month until it had acquired all nine and had trained pilots for the transition from the Dash8’s to the newer aircraft.

CAL, the Sunday Express understands, had paid for the first ATR from its 2011 profits.

Each ATR cost approximately US$18.9 million and that financial responsibility is now with the Ministry of Finance.

But CAL hasn’t been able to meet payments and as a result, was unable to take receipt of the two finished aircraft.

“There is a disconnect with how the company is spending money and how they should be spending money,” said the source.

“Other less important expenses have been given priority.”

In a condensed financial reports, which spanned 2008-October 2011, submitted to Minister Maharaj on October 5, CAL chief operating officer Robert Corbie had said CAL’s 2011-2012 financial outlook depended on the current fuel facility being maintained, that approved financing will be received from the government for the financing of the ATR acquisition and aircraft acquisition approvals for implementation of new routes will be received as they were essential for the company.


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