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By Sasha Harrinanan Thursday, April 26 201
CONFIRMATION of financial troubles at State-owned Caribbean Airlines Limited (CAL) came on Monday from newly installed chairman, Rabindra Moonan, during a sit-down interview with Business Day on Monday
“The reports that I’ve gotten (indicate) there are problems with the finances which have come about to a very large extent because of the purchase of nine planes from French manufacturer, ATR. Some of the money, I understand, was used from the cash flow to make the down payment for two or three of the aircraft,” Moonan revealed.
During an interview at his San Fernando business place, Horizon Investments Limited, Moonan was careful not to cast blame for the airline’s current financial woes on his predecessor, George Nicholas III or anyone else.
However Moonan said from what he had been briefed on as of Monday, all indications were the ATR deal simply added to CAL’s debt — the airline owes $30 million to fellow State enterprise, National Petroleum Company (NP) and $60 million to the Airports Authority of Trinidad and Tobago (AATT) for rental of space and other services.
“CAL did not get long-term financing for the purchase of those ATRs,” Moonan explained, “so we will have to look at the contract to see what sort of leeway we have. However our Dash-8-300s (which service Tobago, Grenada and Caracas) are aging, so a total re-assessment of the fleet is one the things which would be high on our agenda.”
What does Moonan have in mind as a possible solution? Wet-lease and dry-lease contracts because “delivery of the remaining seven ATRs,” he said, “is something we have to review in terms of available financing. Under a wet-lease, you hire an entire crew with the plane versus the aircraft alone under a dry-lease.”
What about CAL’s outstanding bills with NP and AATT? While Moonan did not refer specifically to the AAT debt, he did tell Business Day “working out a system of payments to NP” would have been high on the agenda when he met with CAL’s executive team this past Tuesday (April 24) and when he chairs his first Board meeting sometime next week.
CAL’s new chairman said he takes a collaborative approach to things and so would not want to comment just yet on an outstanding pledge of US $5 million, made on November 30, 2011 to Prime Minister Kamla Persad-Bissessar’s Children’s Life Fund by former chairman, Nicholas III.
“The Board would have to review what has taken place and where CAL is now, financially, before making a decision as to whether or not we can fulfill that promise to donate US $5 million now or in the future.”
“There are times when, in the interest of sound business decisions,” Moonan cautioned, “that we cannot operate in an emotional manner. Therefore the facts and figures will dictate what CAL can do. There are times we may have made decisions under different conditions but the Board must assess the situation today before making certain commitments.”
All of these plans however, hinge on the results of a Ministry of Finance audit into CAL’s operations. A preliminary report of this audit, Moonan revealed on Monday, was due to be handed over sometime this week to CAL’s line minister, Transport Minister, Devant Maharaj and to the Board.
“Once that is done, we will have to assess the situation and see where do we go from there,” Moonan explained.
Even as CAL tries to find solutions to its monetary problems, the airline is in full preparation and training mode for the June 14 launch of its London route, which would see CAL landing at Gatwick Airport and not what some term the preferred airport, Heathrow.
Even this plan has come under criticism, including from former CEO turned aviation consultant, Ian Bertrand. In last week’s Business Day, Bertrand said the London route was only profitable when CAL’s predecessor BWIA used L-1011TriStar planes because the TriStar was a flexible aircraft that could have been pressed into service on any of BWIA’s North American destinations, particularly New York and Toronto.
Last year, Nicholas III spoke to Business Day about the London route, saying he would re-introduce the service to Heathrow in July 2011, using leased Boeing-777 planes.
The details of that plan have obviously changed, from July 2011 to June 2012 and using two Boeing 767-300ERs instead of leasing Boeing 777s.
Two B-767s were reportedly purchased by CAL from South American airline, Lan Chile. The first plane has already been painted in CAL’s colours and is parked at a hangar in Mexico City, Mexico, awaiting delivery to Trinidad. It was scheduled to arrive earlier this month, April 10 but delivery has been pushed back to May while the second plane is also due for delivery in May.
Moonan confirmed all of this on Monday, saying studies had proven that B-767s would work just as well as B-777s on the London route.
“At this point in time, we feel that is a most appropriate type of aircraft to use. I have to find out why one of the B-767s has been parked up in Mexico City, but I don’t think there is anything clandestine about it being parked up in Mexico,” Moonan declared.
Asked about the profitability of operating a Trinidad to London route, the CAL chairman compared it to a start-up business, in which one expects to make a loss in the beginning but a definite profit “down the road.”
“Starting a new business always incurs more costs than with an established product, or in this case, an established route but we are prepared for that. We hope within two years, at the most, that we will be profitable on the London route,” Moonan said.
In terms of the fuel subsidy provided to CAL by the Government, which would have to include London come June 14, Moonan cautioned against anyone within CAL thinking that a subsidy was equal to “a free ride.”
“CAL has a role to play in social and economic development of TT and by extension, the wider Caribbean. We must look at it (subsidy) in this particular context. But one must not take Government’s involvement as a ‘given’; that an airline could afford to operate inefficiently. People should not think that subsidies are license to not operate in a particular business manner. CAL has to become lean and trim,” Moonan stated.
“The Board would have to review what has taken place and where CAL is now, financially, before making a decision as to whether or not we can fulfill that promise to donate US $5 million now or in the future.”
“There are times when, in the interest of sound business decisions,” Moonan cautioned, “that we cannot operate in an emotional manner. Therefore the facts and figures will dictate what CAL can do. There are times we may have made decisions under different conditions but the Board must assess the situation today before making certain commitments.”
All of these plans however, hinge on the results of a Ministry of Finance audit into CAL’s operations. A preliminary report of this audit, Moonan revealed on Monday, was due to be handed over sometime this week to CAL’s line minister, Transport Minister, Devant Maharaj and to the Board.
“Once that is done, we will have to assess the situation and see where do we go from there,” Moonan explained.
Even as CAL tries to find solutions to its monetary problems, the airline is in full preparation and training mode for the June 14 launch of its London route, which would see CAL landing at Gatwick Airport and not what some term the preferred airport, Heathrow.
Even this plan has come under criticism, including from former CEO turned aviation consultant, Ian Bertrand. In last week’s Business Day, Bertrand said the London route was only profitable when CAL’s predecessor BWIA used L-1011TriStar planes because the TriStar was a flexible aircraft that could have been pressed into service on any of BWIA’s North American destinations, particularly New York and Toronto.
Last year, Nicholas III spoke to Business Day about the London route, saying he would re-introduce the service to Heathrow in July 2011, using leased Boeing-777 planes.
The details of that plan have obviously changed, from July 2011 to June 2012 and using two Boeing 767-300ERs instead of leasing Boeing 777s.
Two B-767s were reportedly purchased by CAL from South American airline, Lan Chile. The first plane has already been painted in CAL’s colours and is parked at a hangar in Mexico City, Mexico, awaiting delivery to Trinidad. It was scheduled to arrive earlier this month, April 10 but delivery has been pushed back to May while the second plane is also due for delivery in May.
Moonan confirmed all of this on Monday, saying studies had proven that B-767s would work just as well as B-777s on the London route.
“At this point in time, we feel that is a most appropriate type of aircraft to use. I have to find out why one of the B-767s has been parked up in Mexico City, but I don’t think there is anything clandestine about it being parked up in Mexico,” Moonan declared.
Asked about the profitability of operating a Trinidad to London route, the CAL chairman compared it to a start-up business, in which one expects to make a loss in the beginning but a definite profit “down the road.”
“Starting a new business always incurs more costs than with an established product, or in this case, an established route but we are prepared for that. We hope within two years, at the most, that we will be profitable on the London route,” Moonan said.
In terms of the fuel subsidy provided to CAL by the Government, which would have to include London come June 14, Moonan cautioned against anyone within CAL thinking that a subsidy was equal to “a free ride.”
“CAL has a role to play in social and economic development of TT and by extension, the wider Caribbean. We must look at it (subsidy) in this particular context. But one must not take Government’s involvement as a ‘given’; that an airline could afford to operate inefficiently. People should not think that subsidies are license to not operate in a particular business manner. CAL has to become lean and trim,” Moonan stated.
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