(Trinidad Guardian) Now that Caribbean Airlines Ltd (CAL) is positioning itself to cope with its external challenges including swift competition, and a smaller subsidy (transfer to state enterprise) of $92.2 million in 2016, Mariano Browne, former minister in the ministry of finance said the airline should not have received a subsidy at all. He said when the airline was first set up it was envisioned that there should be three years of government’s support, not eight. The subsidy it received in 2015 was $200 million and, in 2014, $452 million.
According to the Review of the Economy 2015 bulletin which accompanied the budget documents, the airline received a letter of guarantee for a US$75 million loan. CAL also received a transfer of $216.4 million during the 2015 fiscal year yet it still reported an operating deficit of $104.8 million.
The airline began flying to 10 markets on January 1, 2007, which means that, in 2010, the subsidy should have discontinued, according to Browne in emailed responses to questions posed by the Business Guardian.
In early February 2015, then finance minister Larry Howai told Parliament that unaudited accounts for 2014 showed the airline made a loss of US$60 million inclusive of its Air Jamaica operations, and the airline planned to break even by 2017.
Last week Tuesday, at the airline’s Piarco headquarters, CAL chief executive Michael DiLollo officially announced the airline will stop flying to London on January 10, 2016 because the profits on the route had taken a nose dive causing millions of dollars in losses for the airline. He, however, did not disclose the exact figure of what the losses were, but assured the airline was “well on its way” to achieving a break-even position in three years.
But Browne said if the airline was allowed to operate without any input from the Government it would already have achieved a breakeven position and would not have needed any support.
“CAL was set up to achieve economic viability in three years. That was predicated on government not being involved in the detailed running of the airline. This is part of a wider philosophical position that the Government must address shortly. That is, that state enterprises must be run at arms-length on a non-intervention basis. It must be addressed, sooner rather than later. In short, it must be run on the basis of financial viability.”
Commenting on the need for a bail out, Browne said a bail out may be necessary to provide some form of assistance but this must be “one-off” and have an end date, “because all infants eventually have to grow up.”
Referring to job cuts which DiLollo suggested may be coming for the airline, Browne supported this move saying that all businesses must do what is required to achieve viability and to maintain their independence.
Concerning having a code-sharing agreement with Qatar Airways, British Airways or any other airline, Browne said: “Code sharing is a sensible economic method of using business cooperation to extend market reach and market share. It would be a sensible way of overcoming a market weakness. CAL should code share if the economics is right.”
Stating that CAL is in “full analytics” mode, DiLollo said at last week Tuesday’s news conference, that the airline is looking at the data, understanding the opportunities and exploring how “best to utilise our ltd resources,” to have new accomplishments. He has been chief executive since May 2014.
He added that it costs money every time the airline starts a new route since there is always a risk associated with starting that route.
“In the priority of network (development) we’re constantly looking at which are the best opportunities for us. It’s a mix of risk/reward and we have to convince ourselves that this risk/reward equation makes sense in the socio-economic priority envelope that the shareholder ultimately provides to us. Will we look at it? Can we look at it? Could it be considered? The answer to that is absolutely, it could be, however we are far from making decisions on that particular route (Georgetown to Jamaica) to date.” Referring to competition, he said if CAL does not match its competition it will start becoming “irrelevant.”
“Our idea is not just to keep pace but it’s to advance, understanding our customer, understanding what they want, understanding their very critical values that they have especially customers that are in the (Caribbean) region-everything from the experience, to food, to drink, to what they are looking for.”
