CAL chairman says airline used $$ to buy planes and acquire Air Jamaica

Rabindra Moonan told local media Thursday some of the money left in the bank by the previous board of Caribbean Airlines (CAL) in 2010 was used to acquire Air Jamaica and buy two ATR aircraft.

Moonan was responding to a newspaper report that quoted former CAL chairman Arthur Lok Jack as saying that when his board resigned in june 2010 the accounts of the airline were healthy with deposits of more than $900 million.

He told the Guardian newspaper, “Part of the merger plan with Air Jamaica required some of that money to be put there. Remember that we have a lot of expenditures to pay out. 

“This money...is a fund which will go up and down most of the time. It is a revolving fund. You save when you have and you spend when you don’t have.”

However Lok Jack told the Guardian the Manning administration provided CAL with $315 million (US$50 million) in equity to complete the deal with Air Jamaica.

The former chairman explained that the Jamaican Government absorbed Air Jamaica’s debts and severance costs to ensure that CAL did not inherit any debt as part of the merger deal.

Lok Jack said CAL also decided to take up only the profitable routes that Air Jamaica operated. With respect to the two planes, Lok Jack told the paper the plan agreed by his board was to buy four ATRs and not the nine that the airline eventually contracted to purchase. 

He said at the time the government changed the CAL board was negotiating with the aircraft manufacturer to buy planes using export credit financing with a small downpayment and the balance to be paid over 12 years at an interest rate of one to two per cent.

Media reports on the ATR purchase stated that the airline paid cash for the two planes, which amounted to $239 million.