(Trinidad Express) Caribbean Airlines (CAL) lost US$70 million last year.
And if the fuel subsidy is added, the total loss would be US$110 million ($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” unaudited” 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 expected 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.
Asked whether there is a clear conflict of interest between Jaikaran’s position on the board and the degree to which CAL has been supporting many of the ventures which involve his companies, Howai said Jaikaran has a company which perhaps did work for CAL even before he became vice-chairman of the board.
“But there is a concern that we do have—where a director is getting a contract from the company; our expectation is that the director is not involved in any way in the discussion or decision concerning the matter and that the board of directors would be the appropriate body to approve such an arrangement…the director himself being excused from the deliberations of the board. These are some things that we are trying to get clarification on—was this decision taken by the board? “
The board, in approving this arrangement, must be satisfied that it is getting value that is defensible and easily explained to the population at large, Howai stated.
“Yes, you have a company and you can’t be expected to stop the business of your company. You are on board. Your company does business with Caribbean Airlines. If there is going to be an approval of any such undertakings, then it should take place in a particular kind of way.
“That protocol is that it must be approved at the highest level of the company, which is the board, and the director (Jaikaran) should not be involved in any of the deliberations.
“Because it seems, and that is subject to correction…that the director may have liaised directly with the management. And it would have perhaps created some degree of discomfort somewhere along the line”, he said.
Asked whether Jaikaran should be on the board, given the potential of conflict of interest situations, Howai said when he gets all the data, the ministry would come to a conclusion on that and present its findings and recommendations to Cabinet.
Asked whether any jobs were on the line, he said: “Like I said, we would go to Cabinet and let the decision be made. I don’t want to pre-empt Cabinet.”
