CAL gets $20 million payout

| 22/06/2010

Cayman Islands News, Grand Cayman Island headline News(CNS): While most government departments and agencies are seeing a reduction in their appropriations in this year’s budget, Cayman Airways Ltd (CAL) has been given an increase in its government handout. In the first line item to be voted on by Finance Committee for this year’s budget appropriations on Monday afternoon (21 June) the national flag carrier received $20.1 million. This included an increase on the amounts allocated last year for the airline’s routes to the Sister Islands, the strategic gateways in the US and the region, as well as a new payment of $5.1 million to start repaying the balance of loans the airline has accumulated as a result of previous unfunded losses.

Although the management of the airline revealed recently that ithad reduced some of its operating costs, CAL has still  received more in the budget this year than last. It has been given $2.5 million for the domestic air service, $1million more then last year, which the chair of the board, Jude Scott, explained was due to the airline’s new policy of greater transparency and realism about costs.He said the new figure was a true reflection of the cost of subsidising, mostly the jet service to Cayman Brac.
Scott said that management was examining the routes to and from the Sister Islands in an effort to consolidate and reduce the frequency of the twin otter which flies six times a day at 70-75% capacity and the jet which flies four times per week at about 55% of capacity.
He said it was not easy to reduce the flights because of connection issues, and attempts to reschedule had so far resulted in disruptions, so there was still work to be done on trying to streamline the domestic routes.
Scott explained that on the international routes in some cases the airline was breaking even and almost making a profit but the $12.5 million appropriation, increased from $11,924,000 last year, was to cover the strategic gateways requested by the government to attract visitors from specific places in the US.
Asked about profitable routes, Scott said he did not want to speak specifically about which ones were the most profitable because of the competitiveness of the industry, but he said the airline was working hard to make more routes break even or make money. The new appropriations, he said, now reflected the real cost of running the routes that are not likely to be profitable but still have strategic value for tourism.
The chair also explained that the new equity investment payment or direct cash subsidy of $5.1 million given to the airline this year was to enable it to start addressing accumulated outstanding loans of $51 million. Scott told the Finance Committee that the airline had previously borrowed as a result of unfunded losses, and aside from paying the interest it also needed to start paying back the principal.
“The airline has not been sufficiently funded and has had to borrow to cover operating costs,” Scott said. “We are trying to make the airline more efficient but it will never be in a position to pay down the debt so government has committed to addressing the debt over ten years.”
Asked by Ezzard Miller about seeking private partners, Scott said it was not his position as chairman to offer an opinion on privatisation but to make the airline as efficient as possible and to work out the value of CAL. He also indicated that he was working to maximise the returns and work on customer loyalty.
Minister of Finance McKeeva Bush, the first elected member to ever chair a Finance Committee, told Miller that if there were to be any discussions about privatising CAL he would be the first to know.

 

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  1. papercaymanian says:

    We certainly don’t want to live in world without CAL. We would put our tourism at the mercy of the other,less vested, airlines.This being said I would love to see a more cost effective operation. A lot of money is being left on the table due to inefficient cargo ops, marketing , etc.

    Most airlines lose money but usually not on this scale for this size of company.It would be nice to model a profitable company like Southwest instead of paying people from Lufthansa to tell us how to operate.

    The Brac jet service should be modified to lose less money. It would be nice to see an apolitical Caymanian businessman in charge and maybe steal a good Southwest manager type to be the ax man to chop ugly losses.

     

    • Anonymous says:

      A world without CAL would be just fine!

      Governments should not be in the airline business. This is all “stupid national pride”. How many years you need to try and make this “inherently bad business” profitable? Rather, how many years you will need to realized it won’t be profitable?

      I truly believe that our tourism would benefit from the non-existence of CAL, simply because they are instrumental in keeping airfares exuberantly high, and creating a price fixing effect amongst the other carriers that also service the Cayman Islands. Consequently, making this destination ridiculous high in airfare cost, when compared to other Caribbean destinations.

      Barbados tourism does well without a national carrier!
      I have not flown Cayman Airways in over 6 years, simply because I have many other comparably BETTER OPTIONS (I guess you can go to to the airport any given day and prove this for yourself). Cayman airways should be privately own (if it continues to exist).

  2. Anonymous says:

    It’s not surprising that CAL gets $20mln, what makes me aghast is that the truly farcical Turtle Farm/Boatswain’s gets an additional $10mln!!!  Where is the necessity in that place?!?  That’s one fifth of the hotly debated school project, and next year we will have nothing to show for it!  Straight down the toilet during hard times!   

  3. Anonymous says:

    It is very simple really……If it costs money, sell it.   If it makes money, keep it.

     

  4. Anonymous says:

    OK – Bailing out Cayman Airways is one thing but why is the Premier trying to bail out all the others with his luxury travel?

  5. Burnard Tibbetts says:

    Regarding the Budget figures concerning Cayman Airways and the various comments.

    $20.1 million dollars in the budget for Cayman Airways is a lot of money to people who only look at a few of the facts instead of the overall picture.

    Let us consider some other relevant facts that affect our islands economy directly and indirectly:

    1. Cayman Airways provides employment for over 350 employees, the great majority are Caymanians who circulate their money within the islands and in turn provide employment for other people and businesses.

    2. Cayman Airways has provided many jobs on the professional level that gives our own people opportunities that are not always easy to find, as well as many others in the lower ranks.

    3. Cayman Airways Jet and Twin-Otter service to the Sister-Islands is vital to the economy and well-being of the other Caymanians that are also an integral part of the country.

    4. People that the airline has brought to Cayman Brac and Little Cayman have contributed to the economy of the three islands by their investments and Land Transfer Tax, which is often collected in Grand Cayman and is shown as Grand Cayman revenue.

    5. Thanks to the airline a significant amount of employment is also provided in the Sister-islands in the hotels, condos and other tourist related industries.

    6. Some economists claim that each dollar that is put in circulation in a territory generates as much as $64.00 benefit to that area before it goes out of circulation. If that is anyway near accurate, it is easy to see the benefit of circulating money in the country. Failure to circulate money internally can have disastrous effects throughout the country.

    7. The Government and country as a whole is getting value for the money it puts in the airline as it provides not only an important service but employment for a significant number of Caymanians that could have to go to other countries and contribute their expertise and abilities, which we would lose the benefit of.

    8. It was stated that this money was in effect covering of short-fall incurred over a number of years 4,5, 10? certainly nothing on the order of a one year requirement.

    9. If a comparison was made between Government’s contributions to Social Services compared to its contribution to the airline, it is likely to show that Social Services is costing considerably more, and that abuse may be quite significant.

    10. I believe that Cayman Airways has a very dedicated and competent Board of Directors and dedicated staff who are doing everything in their power to make the airline a success and help the country in every possible way.

    11. It must also be remembered that if we depend on other airlines, that they could discontinue their service at anytime and thereby cut off our lifeline.

    Let us remember that a bird in the hand is worth two in the bush.

    • Anonymous says:

      20 million divided by 350 employees is CI $57k per employee subsidized by the taxpayer.

      Without the subsidy, the money would still circulate, but by the people who earned it instead of by the government who took it via tax.

       

      • Anonymous says:

        Thats true but you also have to consider all the revenue this airline brings in to the islands.  This isn’t just paying people, its paying people to bring lots of money in to the island….maybe you should check how much private airlines in the eastern caribbean are charging the governments of those islands to continue to fly to their island, similar cost without the backing in time of natural disaster etc.

    • Anonymous says:

      Allow me to correct you on your items 3-5, as when Island Air was privately owned and operated it work very well indeed without a need for the taxpayers to bail it out on an annual basis.

      But surely you knew that…

      XXXXXXX

      • Anonymous says:

        And is this why they are still in business? 

        but you knew that…

        • Anonymous says:

          No the government took them over by imposing a landing fee that had not previously been applied. Perhaps because they weremaking money?

          But surely you knew that

          • Anonymous says:

            The government stepped in with CAL Express when Island Air was about to fold their inter-island service. This was done to  provide a vital service that was going to leave the Sister Islands without air transport.

        • Anonymous says:

          Anon 22:08:

          That was a cheap shot. They were put out of business by Cayman Airways playing a predatory role and swamping the same route with the same type of plane.

        • Anonymous says:

          island air was forced out of the market

      • A Caymanian says:

        But of course Island Air was able to operate profitably.  But I certainly do remember the issues of landing fees to the CAA not being paid by Island Air.

         

        And the airplanes, the C-172, C-206, BN-2A Islander, the Navajo provided a total of 30 seats. With only the Islander and Navajo operating schedule between the Sister Islands making it only 18 seats available for the route.

         

        So yes, it was easier to fill those planes.

    • Anonymous says:

      Its scary that so many living on Cayman might agree with you.  It also explains why every government run or government interfered with anything is so messed up.  In the rest of the civilized world 2+2=4 not 2+2=40.

  6. Cayman Girl says:

    I have so much love for CAL and I really wish it could be made profitable.  I worked there for several years and while so many changes are needed, I always felt a sent of pride and nationality when I saw our planes.  Anytime you are away and you get to the airport and see the Sir Turtle on the tails of the planes, you immediately get a sense of pride and home.  I would hate to see CAL go.  I agree the 737’s are old and run down, over used and should be replaced with more modern aircraft.  The cost of fares must go down, you cannot justify the prices we have to pay to travel to Jamaica or Florida, its too expensive. 

    CAL was there through every hurricane, when most other airlines left, they provide charters giving foreigners a chance to visit home, they bring aid to other neighbouring countries when in need and they provide livlihood for its employees.  I wouldnt trade my years with CAL for anything.  I just wish the Board members and the government felt the love and pride in our airline that I do, maybe then they would make the right decisions.

    • Beachboi says:

      I too used to feel that sense of pride when I saw CAL at an airport in the US, but just to clear a few things up:  First Sir Turtle is no longer on the tail.  He was replaced by what looks like someone shredded the Coat of Arms and tried to glue it back together around…..well around the tail of an airplane.  And for this I believe that CAL / we paid almost $100,000 per plane.  What was wrong with Sir Turtle?  Also you state that the aircraft are old and need to be replaced and that fares must come down.  Neither of these can be accomplished without revenue to pay for them and proper financial management to show a revenue rather than a consistent loss.

      It is just not worth keeping CAL afloat with so much money when it is obvious that it cannot be a profitable venture.  Many management teams / boards have tried and failed.  It is time to sell it or let it die.

      As for hurricane season I dont believe that other airlines would abandon people here in Cayman just as they wouldn’t in any other Caribbean nation that does not boast a national flag carrier.

  7. Anonymous says:

    the worst part is everybody in cayman is forced to susidise cayman airways even if you want to fly AA you end up paying an inflated price because they cannot undercut cayman airways…..

    so we have no price competition….. what a great little island we have here….zzzz

    • Anonymous says:

      Your theory about AA not being able to undercut Cayman Airways and offer lower fares is not true.

      I did a little comparison shopping for the carriers:

      29 Jul-9 Aug MIA to GCM

      AA return fare = $178

      KX return fare = $318

      Well clearly they can and do undercut but then I decided to check a route of similar distance where there is no domestic competitor for AA to undercut and see them in their true colours – MIA to Providenciales, Turks & Caicos and here’s what I found:

      AA return fare = $304, ie. very similar to KX fare to GCM 

      The notion that AA is just rearing to give us lower fares if only KX would not stop them, and if only we got rid of KX, AA would give us low fares is therefore disproven. The lesson is that driving Cayman Airways out of business will not decrease fares but in fact may increase them.   

       

    • Anonymous says:

      I am terrible in math and do not know anything about running the plane business, but what if CAL became like "Spirit air or Jet blue" and ran really, really low fares from the cold weather destinations in the US. They could do alot of their advertising thru Trip Advisor and the word would spread. In the dead of winter people are always looking for cheap flights to the caribbean and CAL could fly direct?!?

  8. Prudence says:

    Privatise/sell it.

  9. Anonymous says:

    I recall that in 2000, when the PPM Govt. engaged a local consulting firm to review CAL, the advice then was to rid CAL of the inefficient 737s and make other crucial changes so as to reduce the loss to a managable sum (I believe $5million-$7million) per annum. Effectively this amount would have been in order to ensure the loans were being paid down/off over time.

    The PPM Govt. did not appear to have the will to implement these needed changes and the UDP, when it took over the Govt. in it’s no confidence vote, (due to lack of leadership-maybe on CAL?), and removed the consultants, it decided to disregard the advice of the consultants and instead bought another/new 737.

    Over the course of the next number of years with record-high fuel prices, 9/11 and the resultant downturn, operating these inefficient/older aircraft, caused increasing losses. Nere a word was said by the UDP or even the PPM on CAL (another of our Holy Grail areas-the Financial Sector being the other). I am surprised that the debt is not hgher; and in fact, if there had not been a collapse in the price of oil, the debt would have been higher.

    Now we continue to operate these inefficient aircraft to the Brac and elsewhere instead of recognizing that we are fighting a losing battle. When we we ever learn? Of course, we will need to hire and pay an "international" consultant to tell us what to do. If I were a betting man, I would bet that the advcie will be, get more/newer aircarft or shut it down. CAL will "…never be in a position to pay down its debt.." (read "never be profitable") but keeping the inefficient aircraft will not help and please pray that the price of oil does not exceed US$100 and go to $150 again or all bets will be off! The only option will be to park the aircarft (unless of course we keep the losses quiet and come to the people AFTER THE FACT!

     

     

  10. Anonymous says:

    cayman airways…a prime example of why governments should not run airlines…..

    how can the keep losing money when it cost on average $300 to fly 70 mins to miami??????…….. there is no such thing as a $300 plane ticket in europe!

    • Anonymous says:

      > there is no such thing as a $300 plane ticket in europe!

      Rubbish. Look at fares to Cyprus. This point is moot anyhow. Europe is a different market.

    • Anonymous says:

      You cannot compare flights in Europe. It’s all a question of volume of traffic.  

  11. Anonymous says:

    You could start with the Marketing Manger or which ever bright spark just put on the EXPENSIVE promotion to fly to Jamaica which really is no deal at all especially from Cayman Brac at over US$400+ to get there WHERE IS THE DEAL IN THIS. And to top it off they must have spent a fortune on the flyers, road signs and post cards. Thousands of them were sent to the Brac a few days before the whole promotion/special expires and where do these post cards sit AT THE CAL TICKET COURNTER AT THE AIRPORT. Alot of damn use this is ie. if you are not travelling you will never see this advertisement. Why are the staff in the Brac not out delivering this around the island so we can see it – also we have less than 2000 people living here and out of that only a handful who travel much less to Jamaica. A total total total waste of money and time plus the price is NO DEAL anyway. XXXX

  12. Anonymous says:

    It does not matter how many times you change the Board or senior management. The real problem in Cayman Airways is easy to identify.

    Over the 41 years or so, it has gradually accumulated debt which I believe stands at over US$45 million.

    I would estimate that the (bank blood money) interest only on this is in the region of $6 million a year.

    Do you know how many planes you would have to fill to pay that? Let’s take a shot. Say 122 passengers paying on average $150 a leg. That would be about 330 full planes, which is probably over a month of flying just to pay the interest, forget about the principal, salaries, fuel, maintenance, pension, industry fees, plane leases, etc, etc.

    So there you have it. You cannot effect change until you do something different, to believe otherwise is insanity. We have demonstrated total insanity as we change our boards and staff and never deal with the debt issue.

    The government is responsible for this 100% because it compels CAL to fly unprofitable routes and then dips into its back pocket to bail them out once in a while. Then the people cry foul because it apears that CAL is incompetent. I can assure you that CAL has many seasoned aviation professionals who actually care about their jobs.

    If the government wants to send CAL to unprofitable areas, then it needs to quantify the losses incurred and re-imburse CAL or just charter the jets and take the revenue.

    They won’t do this because the facts will be laid bare and the Caymanian people will be able to see inside this scam that the senior government uses CAL as their personal airline to run however badly they like.

    If there are any Caymanians that actually care, why don’t you ask your leaders about this? Too busy lining your own nest? Thought so, me too.

    Back to it then. Sorry for opening my mouth.

     

    • Anonymous says:

      The late James Lawrence said 30 years ago that Cayman Airways was then and always would be an intolerable financial burden on these islands. He was demonised by our National Hero, Jim Bodden, for daring to say so. History is on Lawrence’s side.

  13. vocal local says:

    Mr. Scott seems to be somewhatmore open, agreed. However, he also goes on to speak about the true cost by taking into account the true value that flying to some destinations brings about (seeming to rationalie that flying to New York, Boston and Chicago often at 30% occupancy) brings tourists with money to spend in tourism. Also seeming to indicate that these tourists would have no other way to get to Cayman.

    I totally disagree with this. These tourists would still come and spend money here (if they are minded to come to our expensive islands) on other airlines where such people are likely to have frequent flyer miles with also.

    And flying the jets to Cayman Brac is plain foolishness!

    Concentrate on Miami, and other regional destinations like Honduras, Cuba and Jamaica and the losses would drop drastically. Cayman Airways has a monopoly on these destinations…yet the powers that be are flying to NE USA and Cayman Brac…go figure!

    This needs to stop man!…dis is jus plain fooishness…in dese ya times specially!

  14. Anonymous says:

    I’ve been harping on about this for years…. Sell it…..  Contract with a purchaser that in the event of a hurricane the entire fleet is brought back for evacuation, as this seems to be the only reason I hear for keeping it. Then sell the Turtle Farm. Voila…. $25m of savings a year! Rocket Science it is not.

  15. Anonymous says:

    If you think that’s bad check what Cayman Brac got this year 09/10 and will get in 10/11.  Paloma?

  16. Anonymous says:

    How can a small town of 50,000 people support an international airline? The answer is simple. It cannot.

    Cayman Airways has never shown a profit in its entire history, and will never show one.

    Providing jet service to a small town 100 miles away is a sure loser, and totally unnecessary.  Probably no country in the world provides jet service over such a short distance.

    If Government is really interested in cutting costs, Cayman Airways is an excellent place to start.

    It could continue with selling the police helicopter. This expensive and  almost useless luxury costs about  $1500 per hour to operate. 
     

    • Hold it now says:

      Its not the size of the pensil that do the work, its having a good sharpner.

    • Anonymous says:

      I don’t understand the reference to "a small town 100 miles away". We are not of course like a small town located within a large country where there are many other means of transport. We are an  Island nation that is 500 miles from Miami. 

      The police helicopter proved useful in the capture of the BT robbers.

  17. Jab-Jab says:

    Civil Service – This is where una pay cut is going.

  18. noname says:

    theticket office staff is so nice, well at least 1 or 2 of them

  19. Anonymous says:

    it is more expensive to loose Cayman Airways

  20. Anonymous says:

    A million here, a million there, pretty soon it adds up to real money. WAKE-UP!!!!!!!!!  It doesn’t matter if some of your routes are profitable if you are losing money overall. It would be more cost effective to sell or eliminate Cayman Airways and use a fraction of the money saved to subsidize foreign carriers to keep them coming here and providing us with low cost dependable air service. We could then use the extra money saved to pay off the existing debt and buy more Christmas lights for McKeeva’s house.

  21. Anonymous says:

    is this for real is anyone actually going to say or do anything sensible here or is it just getting more and more unreal? $20 million ? everyone knows air travel is loosing billions every year. this will never get any better. doesnt anyone know that? in a time of massive borrowing from the uk (again) they give $20 million + to the flagging airline? again?

  22. Kent says:

    I am speechless!

    I can not believe that this is even close to acceptable to the people of the Cayman Islands!  In times like this, the heads of our government are unwilling to do what us in the private sector are forced to do, and that is actually cut back and live on the money we are able to bring in through our labor, not by raping the citizenship of our country.  Most of us in the private sector have seen our actual net income decrease drastically, yet what is supposed to be OUR government seems to think it is a God given right to simply squander the fruits of OUR labor.  Shame on you!

    • Beachboi says:

      I agree this is a disgrace.  If CAL cannot function as a business entity then they go out of business.  Simple!  Restructuring the staff/board has not worked time and time again.  It seems that no one is qualified to run an airline.  CAL has had to receive a subsidy from the government every year.   Have they ever shown a profit??   Is it worth 20 million a year for Cayman to have a national flag carrier?  NO, not at this cost.  Sell it or close it and then sell the aircraft!!  I am tired of working hard so that staff at some other company i.e. CAL and Boatswain’s can draw a salary.

       

      • Anonymous says:

        $20,000,000 divided by 400 staff is $50,000 per annum. Cheaper than Northward. 

        I doubt American airlines will pick up all our pilots and cabin crew laid off. 

        CAL is a great marketing tool for our tourism industry so it has many indirect benefits as well. It not only serves our local popolation but a significant amount of tourist traffic. 

        Having qualified business people run it, as is the case now, is a step in the right direction and i like the increased transparency about the true costs, which seem to have hitherto been hidden.