(Trinidad Guardian) For Caribbean Airlines (CAL), profitability has been as cyclical as the aviation business. While it has posted some profits on paper over the years 2009 and 2019, those figures were outweighed by the debt the company incurred of more than $1 billion.
In the course of the company’s operations, it accumulated losses of US$454,550,903 million ($3 billion), according to its 2020 management accounts.
CAL started in January 1, 2007, capitalized with US $100 million ($677 million)—a clean balance sheet, a leaner flight schedule, subsidized fuel (CAL had a fuel hedge set at US$50) and a smaller staff.
The airline’s birth, based on a plan by its former chief executive Englishman Peter Davies, came after Government had already invested US$250 million ($1,692,500) in an attempt to keep its successor British West Indies Airways (BWIA) alive.
T&T’s aviation turnaround is credited to Davies, whose tenure was dogged by controversy over his salary, compensation and wrangling with BWIA’s unions. Davies had said he was brought in to look at the restructuring of BWIA, but during that time it became evident that a new entity needed to be formed with a new culture.
“I always see myself a bit like a harbour pilot. My job is to bring the ship in, get it to turn around and head back out to sea,” he had said in a Business Guardian interview on October 19, 2006.
Funded by the Government, CAL was not expected to produce a profit in the short term and could be up for sale if the offer is right, Davies had said at the time.
Meanwhile, according to Draft Estimates of Recurrent Expenditure for fiscal 2023, the sum of $450,000 was allocated to BWIA for fiscal 2023 even though the company was shut down in 2016.
CAL, which began debt free, made several bad investments over the years which cost the company more than $1 billion in losses.
CAL’s turbulent years
By 2008, CAL was set to make a modest profit.
Then chief executive Philip Saunders, who was recruited by Davies as his replacement having previously worked with him, said the intent was to break even in 2008 and move upwards thereafter. But the airline’s early success and stability depended largely on the fuel hedge which it received from the Government. (SEE BOX)
The turbulence started in 2010. Saunders departed and was replaced by Captain Ian Brunton and the People’s Partnership had won the elections. Changes were made to management and to the board.
A board which included businessmen Arthur Lok Jack, Gervase Warner and Robert Riley was changed over to include as chairman George Nicholas III, businessman Mohan Jaikaran and Allan Clovis.
The Nicholas-chaired board was controversial. There were frequent spats with then Works and Transport Minister Jack Warner, the firing of the company’s chief executive, Brunton, over differences with the purchase of nine ATR aircraft, the decision to lease aircraft to return to Gatwick- the latter decision alone cost the company about $500 million.
It was CAL’s decision to purchase the ATR aircraft with its available cash, US$200 million ($1,354,000), something the company never financially recovered from, even though it was not necessary at the time.
Under the Rabindra Moonan chaired-board, the airline was hit with a ticket upgrade scandal which did not financially benefit the company.
Former Finance Minister Larry Howai subsequently fired the board amid mounting losses and installed Philip Marshall as chairman and then Permanent Secretary Vishnu Dhanpaul as deputy chairman.
Hit by COVID
After losses from its Air Jamaica acquisition and the cessation of the Gatwick route, CAL was on a turnaround under the Marshall chaired board. The airline was selling seats and meeting its financial obligations.
In 2019, under the chairmanship of Shameer Mohammed and with a new chief executive, Garvin Madera, the airline expanded its routes to include Cuba and Curacao, became more tech savvy and was able to post financial statements.
That same year, the company released its unaudited 2018 financial results which showed that the airline made a profit of $42 million.
The last time CAL, which is majority-owned by the Government, presented annual financial statements to the public was in 2015, for its 2014 performance, when it recorded a US$60 million loss.
The climb back to profitability was cut short by COVID-19 and the airline went cap in hand to the Government for a US$65 million Government-guaranteed loan to pay salaries.
However, CAL employees were irate that Madera received half a million dollars in a performance bonus. The bonus, paid in April 2020, was for his 2019 performance in which the airline turned a profit. The decision to pay the bonus was agreed to by the CAL board in February 2020 before a pandemic was declared.
During COVID-19, CAL sent some employees on no pay leave, effected salary cuts and there were temporary lay-offs to keep the airline operational with an immediate impact to the company’s 250 pilots and about 375 flight attendants.
In 2021, after the airline suffered financial losses because of T&T’s closed borders during the pandemic. It again had to retrench workers.
CAL cut 79 pilots as part of a 280-job cut to streamline its operations.
The company subsequently issued a release explaining that it was less than the projected 450 jobs it had intended cut when the restructuring exercise began.
Finance Minister Colm Imbert had pegged the severance costs at $110 million to be paid by the T&T taxpayers, as there will be no input from CAL’s minority party, Jamaica.
CAL’s costly journey
CAL owes over a billion in liabilities, according to its 2020 management accounts dated December 2020.
The accounts revealed that CAL’s total liabilities are US$250,374,991 million—current liabilities amount to $190,386,965 million, while non-current liabilities amount to US$262,389,483 million. Of that sum, $203,701,104 is in long-term financing.
CAL produces annual management accounts. Its last audited accounts were in 2015.
A financial report which went to Cabinet, which spanned 2008-August 2011, revealed that:
• CAL was given US$139.2 million to start up by the PNM Government in the period 2006-2007.
• In 2009, CAL’s profit was US$2.6 million.
• In 2010, the company posted a loss of US$17.6 million. Its total revenue was US$378 million, its operating expenditure was US$390 million, inclusive of a fuel bill of US$73.7 million.
• By August 2011, total revenue was US$332 million with profits for that time at US$16.5 million.
• Employee costs declined from US$64 million in 2010 to $45.6 million by August 2011. CAL had cut several hundred jobs after the acquisition of Air Jamaica in June 2011.
In 2019, CAL made a profit of US$6,741,635 million.
In 2020, with the COVID-19 pandemic, it made a loss of US$103,017,816 million.
Madera, at a press conference last week, said CAL would produce audited statements in early 2024. He said the airline had been in survival mode and was on a path to profitability for 2023, before last weekend’s sick out by pilots.
While losses are estimated at $15 million, CAL has suffered unquantified loss to its reputation.
