Howai takes responsibility for CAL's $$ problems; AJ had debt of TT$12B at time of takeover

Welcome on board. Finance Minister shakes welcomes CAL's new chairman,  Phillip Marshall

Finance Minister Larry Howai took full responsibility for the losses at Caribbean Airlines (CAL), which was included in his portfolio when he assumed duties in the ministry in June 2012. Until then, CAL was under the Ministry of Transport. 

On Tuesday, Howai the told Senate CAL’s losses for 2012 were $704 million. And media reports said in addition to that the airline had to write off $200 million in lost cargo revenue and credit card fraud.

Just over one year ago, then finance minister Winston Dookeran told Parliament CAL suffered an unaudited loss of US$52.8 million ($339.5 million) for 2011. He added that Air Jamaica's unaudited loss of US$38.1 million ($245.2 million) for 2011.

Howai told reporters it took some time to deal with the CAL problem because he wanted to wait and see chairman Rabindra Moonan's approach to dealing with the airline. Moonoan took over the chairmanship from George Nicholas III last June.

The minister explained that he fired the board because he felt that it was responsible for what he called "bad corporate governance".Opposition Leader Keith Rowley said the new board announced Friday "is the first step in a long journey to get back to sanity" at CAL. However he warned that the new board would only make a difference if there are "structural policy changes."

Rowley was a PNM backbencher when the former Manning administration did the deal to merge CAL with Air Jamaica. He said he opposed the plan because he did not think it was feasible.

He advised the new board to go back to the original policy that guided the formation of CAL, which is to create a smaller airline with fewer routes and focusing on the highly profitable ones such. He said the London route was never part of the original plan for CAL.

He said CAL a bad business decision to buy commuter turboprop aircraft and larger planes for fly the London route.

The CAL chairman at the time of the merger agreement was businessman Arthur Lok Jack. He said in April 2010 the government would invest US$50 million (TT$315 million) in Caribbean Airlines Ltd (CAL) to meet "operating and capital expenditure".

CAL had been discussing the business arrangement with a team from the International Monetary Fund (IMF), which was assisting with the airline's divestment. The IMF was bothered by the huge debts of Air Jamaica and was reluctant to lend money to help finance the deal.

Jamaica said it was spending US$200 million (TT$1.3B) to meet Air Jamaica’s outstanding obligations during the transitional period.

Lok Jack told reporters, "The way we have worked it out, we expect that we would get a fairly good return on that money coming into 2011. What we expect and looking at it conservatively is US$12 million to US$15 million per year."

He added, "So we are not taking on any costs at all and what we have happening here is that we are getting a clean operation with routes that we want, not routes that we don’t want...

“We found them (routes) to be very good routes with good load factors, they were developed routes with a number of people flying and the revenue at hand was quite substantial for those routes". 

He said there were "no skeletons in the closets" and as a result CAL will move from owning nine aircraft to approximately 15.

Com Imbert, the Works Minister at the time, said in March 2010 that Air Jamaica would be shut down and CAL would take over its profitable routes to ensure Jamaica maintains its "tourism lifeline" with its major markets in North America and Europe.

He had insisted that Government would not taking over any of Air Jamaica’s debts, which is estimated at over TT$12 billion.