Mac defends CAL payout
(CNS): McKeeva Bush hit back at public criticisms regarding Cayman Airways funding on Friday, when he said that the airline had been running at an annual $20 million loss under the previous administration. The premier said under the last government CAL was underfunded and crippled by financial challenges which it had ignored. The new board has made a commitment to turning the company around and is facing the difficulties in an open and transparent manner, he added. After so many years of funding short falls under the PPM, the new management planned to get the airline back on a sound footing and therefore needed the right level of funding Bush told the Legislative Assembly.
Because of what he said were misleading, biased and uninformed opinions, Bush made a statement to the House. He wanted the public to fully understand what the finance committee had approved for the airline the premier explained.
“I find it most disappointing that such important and positive news for our national flag carrier is being dragged through the dirt by the very naysayers who benefit one way or another from the airline’s commitment to these islands,” he told his parliamentary colleagues.
The government and the airline’s current board had inherited the financial challenges crippling the airline which he said had been ignored for too long.
“The current Board and Management have had the courage to set aside the politics that have plagued the airline for too many years,” the premier said. “For much of the latter half of 2009, the board and management worked on indentifying and addressing the various financial matters and concerns. By the start of 2010, the fundamental financial challenges were identified and a plan to address these was formulated.”
Bush said the funding approved was as a result of this action plan. While people were critical and trying to mislead the public, he said, over the last 3 financial years 2007, 2008, 2009 the airline experienced an average operating loss of approximately CI$19.6 million each year, but the previous government only provided annual funding of CI$13.7 million. During this time the premier explained that non-bank debt had continued to grow because of the underfunding and the principal loan payments could no longer be ignored.
“If the previous administration had funded the airline adequately, they would have been spending approximately CI$22.6 million annually,” he added. “Pretending a problem does not exist, does not make it go away.”
This government had made funding decisions which had been approved by Finance Committee, Bush noted, that he said more accurately matched the needs for the routes Cayman Airways is required to operate. The CI$15 million operating cash was going on interest related to debt, payments for agreed purchased strategic airlift services, including tourism routes and Sister-Islands services and to support the airline’s core airlift operations. The Extra $5.1million, the premier said, was to address the principal portion of the airline’s debt related to historical unfunded losses which amounted to about CI$51 million.
“To formally address this deficiency and the related debt, Finance Committee approved an equity injection of CI$5.1 million into Cayman Airways for fiscal year 2010/1,” Bush stated. “Over the next 10 years, this annual injection is expected to fully address the government’s negative shareholder equity in the airline.”
The premier went on to justify the $20.1million which the airline has received in this year’s ‘bare bones’ budget as he said Cayman Airways provides the Cayman Islands with unique advantages.
“Cayman Airways ensures a competitive fare structure and prevents foreign carrier monopolies while also preventing other airlines from dictating the country’s air servicebased on their priorities, which may not always be in the best interest of the Cayman Islands,” he said. “Cayman Airways also allows a unique nimbleness in responding to market changes and plays a key role in developing new markets for the local tourism industry with non-stop service.”
He pointed to CAL’s role as an essential air bridge, providing affordable fares between Grand Cayman and the Sister Islands. For six months of each year, it provided peace of mind to visitors and residents with guaranteed provision of pre- and post-disaster relief and the capacity for evacuations, the premier added.
Bush talked about the pride in knowing that Cayman has “this tremendous asset” and everyone should show patriotism and support by choosing CAL when the travelled.
“As Caymanians and residents alike, we all have a part to play in the airline’s success. During these difficult economic times, it is more important than ever before for Cayman Airways to be on a solid financial base to better support our tourism industry, which we must not forget is one of only two pillars of our economy,” the premier stated
By giving the airline what he said was the correct level of output payments and addressing the debt related to historical unfunded operations Cayman Airways was now able to effectively operate as the “strategic engine for tourism and economic development, providing the country with an optimized return on its investment,” he added.
Category: Headline News
CAL get big cash coming in their bank account so all the goverment employees and family can carry on flying for cheap airfare or for free! It is about time for CAL to stop giving free tickets away while losing million of dollars
The CAL employees deserves the discounted plane tickets!!! The ones that do all the work (example: baggage and check in agents) dont get paid well at all! Work their butts off with low income while the high ups get paid $5,000 or more for sitting on their butts fiddling their thumbs. People dont know what the CAL check in and baggage agents go through. Work one day for them and you’ll see. I’ve been witness to them being cussed out for something that they had no control over. They dont get paid enough for the public to jump on them for the things they fuss about
I agree that the employees are not well recognized at all, not only the baggage and checkin agents but the flight attendants, maintenance mechanics and engineers that keep those old planes in the air and safe are treated badly by the higher ups. its a shame as a few elite retired air jamaica people are now running our airline.
Question: Whats the fastest way to become a millionaire?
Answer: Start off as a billionaire and buy an airline.
Has he paid the money he owes to CAL yet, or will he expect the people (the government) to pay his outstanding CAL bills as well? CNS, can you please check if his CAL bill has been paid, I’m worried that we will end up paying it for him, like everything else.
Why should CNS do it? Why don’t you get off your butt and do it?
The Government should have sold part (40% to 60%) of Cayman Airways along time ago. Let someone run it that knows how to run a business, why are do they keep injecting funds when they cannot make it profitable.
I say sell 60%to a private investor for a period of time (on contract). if the government does not like how things are being runned upon contract renewal do not renew or be like Air Jamaica take it back.
Over the years, since Dirty Reid was printin the paper I have keep papers and articles in a box so I can read up on the comments made by the politico’s on various subjects. Since the inseption of CAL the same things have been said over and over again for almost 3 decades. "We can be profitable if….we are restructuring….the people need CAL……national pride…..its the other LOGB’s fault…its the other party fault…its the price of fuel". The excuses never end. 1) CAL will never ever be profitable, it can never be profitable under its past and present structure so we might as well stop whining about it. 2) Stop spending ridiculous amounts of money trying to make it profitable. 3) CAL is political, it is votes, every employee, past employee are voters and have family members that are voters. 4) If you are going to keep CAL Government (BTW owned by the people…you paying for it "mon") then stop politrickin CAL and just sub it with tax payer funds. But at least use CAL as a tourism tool and drop the prices to $150 round trip Miami and see the occupancy rates rise. 5) If you don’t want to do that try to sell 60% to an outside purchaser…….if you don’t get any suitors that will validate what everyone is whining about.
cayman airways is like any other government body….over staffed, over paid, under performing…… and everybody in cayman pays through the nose for it….. welcome to wonderland
So if CAL goes under… What about the sister Islands? what about all the "free" Marketing we get when people see our planes at the international airports…
I am not one to agree with Big Mac but I am A FRIM believer in keeping Cayman Airways running as long as they make a constant effort to improve.
Some of you are talking about the Turtle Farm… CAL and the Turtle Farm are two very different discussions…
I am not a fan of the Turtle Farm at all. I think it is overpriced for the services it offers. Butthat is a different convo
CAL on the other hand serves a FAR more valuable service to the people of this country… Also how many Caymanian pilots work for CAL? A whole lot! And I am so proud of that fact! Caymanians go to flight school and come back home and where do they want to work? They want to work for Cayman Airways! I don’t know if I am having a bias moment but CAL is one thing we should not let go under…
The Turtle Farm on the other hand could close it’s doors tomorrow for all I care…
Just my humble opinion…
Well, if what Flyboy is saying below is true, and the salaries are the highest in the world, then I guess we know why so many of the pilots want to fly with CAL.
It’s about time CAL lowered its prices – the reason they are in so much debt is because their flights are astronomical and so people don’t fly with them. On the occasion when CAL has been cheaper, or the same price, their flights have been practically empty. Why? Because 98% of the time AA, Delta or United etc are cheaper. Why is it exactly that the competition is cheaper than the local airline?
To take a line out of a cheesy movie: If you lower them, they will come!
I think I may just put in that FOI request – Mickey Mouse is already taken so perhaps Goofy can come out to play …
I agree with you 100 %.
There is a huge difference between CAL and the Turtle Farm.
CAL is very valuable to this country and provides many jobs to Caymanians.
Grow a pair Mr Premier! Scrap CAL, The Turtle Farm and Pedro Castle. All a total waste of money!
It would be interesting if CNS investigated Cayman Airway’s pilot salaries, as I have it on good authority that they are among the highest paid pilots in the world. Is that really necessary for such a small airline?
CNS: Why don’t you make an FOI request if you think it is in the public interest?
This goes to any and all — "Not everything that can be counted counts, and not everything that counts can be counted."
Look into the intangibles (brand loyalty, culture, ect), and see if they reflect / translate in the bottom line of the economy. — If they truly do not, then you can revise and review, and make POSITIVE contributions to help your society and economy grow to something that you as a people can be proud of.
I built my car in a way that would allow it to run WITHOUT fuel or gasoline. I could make lots of money, but I can’t because of "YOUR STUPID LAWS" backed by greedy investors.
We could segregate ourselves from the world and live off a different means on running our vehicles. Even if I had the heart of sharing what I got with other people for no reward and monies, your "STUPID LAWS" would forbid me.
Hence I have a car running without fuel and the only ones I can benefit are those I trust to keep it a secret.
Greed will end up destroying the world and forming everyone into a herd of economic slaves. The rich man and governments keep people like us "down" in order to make their monies. And if people like us ever share what we have, "they" through the "donkey capitalistic system" will end up stealing it and using it again to make their monies. There are many things that could benefit the world for FREE, but has been intentionally limited for money’s worth
According to the premier’s statement which I got to hear, some 7M of the amount is on debt (the 5.1M injection and 2M in interest out of the output payments which CNS didn’t breakout). The means that the CIG is paying about 13.5M for current subsidy. This is certainly a tremendous amount for our little country. What is the benefit? Some study that both the UDP and PPM have referred to claimed direct impact to the economy of over 200M. If that’s the case, then this is money well spent.
I also gathered from the budget discussions that Monetary Authority gets near 20M a year from government too. Why? Shouldn’t the banking fees and such pay for this? Also wondering why nothing was reported on this. Maybe because there was not big change in the amount?
Either way, I guess that investing 20M into each of our main revenue sources is necessary for our economy. Both parties have had to fund them over the years. We just need to ensure that both Tourism and the financial Industry are served properly regardless of who is in power.
$20 million a year and where does it all go really? That’s a lot of paychecks for a company that is continually failing to even attempting to make a profit. Or just a convenient way to take public money and change it to personal profit? Who does the money go to? And why? And why does Caymans leadership demand that the public keep paying for it. And their airfare, and their hotel bills, and their utilities, and their security, and paychecks for all their friends?
Because no one tells them they can’t.
the definition of insanity is to try the same thing over and over and expect a different result……..like throwing money at cayman airways and the turtle farm!!!!!!!!
Turtle farm makes no sense as I’m not sure what it’s trying to be. Who’s is going to spend big $$ to go swim in saltwater when it’s free. Who’s gonna pay these crazy turtle meat prices? At least with CAL, it has the potential to increase tourism. I like their latest sales… finally seeming to get their act together – even on facebook now.
IT’S ONLY MONEY
And Mckeeva knows how to waste it. Welcome to McKeeva’s world of wasteful spending which includes his travels staying in the best hotels and being away from the country longer than he is in the country doing the job that he is being paid for – Sounds like a civil servant with a private busines on the side. All the big talk on the CV issues came to nothing like everything else this man tries does – ALL TALK
This man (Mac) is just unbelievable!
He castigates the previous Govt. for spending on education/schools, infrastructure/roads and the new Govt. Admin Bldg (all of which are sorely needed and will result in savings to Govt.) but has no problem with increasing funding for Cayman Airways and Boatswains Beach. Not to mention he does not want to fund the courts for Legal Aid at ten percent of Cayman Air.
Governor; do you or the UK FCO have ANY concern on how the money is spent…wouldn’t it be "good governance" to spend what little resources we have wisely?
When will the little country of the Cayman Islands realize that they can no longer afford to feed their egos and pride to pay for an airline that they can no longer afford?
Those who work for CAL will say that if the airline is sold then they will be out of a job. Why is that? If they are doing a job then the new owners will require workers in Cayman to run the airline.
It is just like the civil servants who believe they cannot work for the private sector, why is that I ask?
Until the government and the country look and deal with the costs in Cayman nothing will get better.
I agree with much that you say, but the problem is that your premise is that someone would want to buy CAL. Unless it was someone who would want to do it for the good of the Cayman Islands, there would be no takers because of the business model of CAL. It’s inefficient aircraft and considerable competition make it unattractive to any buyer for purposes of profitability.
The only feasible model for CAL is a right-sized airline ( we are running old eight cylinder cadillac taxis, when we should be running 4 cylinder minivans) so as to make the airline more competitive (in pricing) and reduce and minimize the losses. That is the best we can hope for. We could certainly justify a portion of the large Tourism budget to be allocated to subsidize CAL as that is the primary purpose (in addiion to national "pride" and so that we have a back-up plan for airlift)
Couple points:
If I own a business that is loosing almost $20 million a year, myself as the owner injecting that $20 million that the business lost does not make the business profitable, they can call it output purchase all they want, fact is, you are trying to cloud the true position that this airline is losing way too much money by artificially increasing the revenue through tax payer’s money.
Of the $20 million per year in losses, how much of that is directly attributable to the Sister Island routes? Why was CAL mandated to offer additional flights on these routes knowing full well that it would be a loss making effort which would require even more tax payer money to sustain.
Those are the questions you should address with the House XXX.
McKeeva can rationalize all he wants and point and blame as he always does but the time has come for some tough decisions to be made. I will use a quote from the news article:
"over the last 3 financial years 2007, 2008, 2009 the airline experienced anaverage operating loss of approximately CI$19.6 million each year, but the previous government only provided annual funding of CI$13.7 million"
ONLY $13.7 million!!!!! He says this like it is the total on a grocery bill!!!! There is no justification for government to give away this kind of money. He just GAVE AWAY 1/5 of the money that the UK allowed him to borrow in two payments to CAL and Boatswain’s Beach. (He was approved borrowing of $155 million, flew home and GAVE AWAY $30 million.) Now he is begging the gas station owners to absorb the fuel increase so that we the people wont feel it. CAL has and never will make money. If I am wrong and they did show a profit once then I stand corrected, but the bottom line is that CAL is a business and if it does not make a profit then it must be sold or closed.
Soon the government will have no money to operate and then the 3/2% pay cut will feel like a burr in the foot compared to the time when the paychecks will stop alltogether. This is a reality McKeeva. Then the UK will step in and I wouldnt blame them if they looked at Cayman like a "money pit" and put all three islands up for sale!!!!!
Cayman Airways is probably the major drain on the Islands’ budget. It is time to let it go.
More blame game.
Its getting REALLY old.
Is UDP capable of anything other than blaming everybody else – i.e. any actual solutions or taking responsibility??
Mackeeva shouts from the highest rooftops about PPm failures, yet steadfastly follows their so-called mismanagement mistakes: for instance, if the country is so broke, per the PPM’s stupidity, Mackeeva cannot justify taking the ridiculous perks created by PPM’s Protocol Office, by saying "PPM did it, not me" – as you stuff the benefits in your own pocket.
So, PPM subsidized CAL – Mackeeva does the exact same thing, with no rationale offered other than "past governments" (which he was a part of) did so.
heh??
Maybe we need to change our name to ‘The Twilight Zone’ – so we all clear on where we are exactly.
I will remind Premier McKeeva that it was his Govt. that added the inefficient 737 which the indecisive PPM continued to operate, that caused the substantial increased losses. I am so disappointed, though I should not be surpirised, that despite McKeeva’s (he was not Premier when he did this) confession of faith in The Truth, he finds it impossible to be truthful about anything.
May I remind Premier McKeeva (I am having extreme diffculty referring to him as the Premier only as he is acting like the McKeeva we all know) that propaganda by any other name is still the untruth.
All of this propaganda is being disseminated because there is no Air Jamaica or anyone else to sell CAL to at this time. If Air Jamica was not in more difficulty than CAL at this time, McKeeva would be disseminating the propaganda that CAL must be sold/merged with Air Jamaica. But because the past Govts’. have saddled CAL with old/aging/inefficient-in-every-regard aircraft there will be no buyers.
The reality is that CAL requires more than continued hope that losses can be reduced and if the price of oil begins to increase… then a new business plan will need to be completed.
The brightest of minds cannot fix a situation if reality is not faced. If the new Chairman or Premier McKeeva continues to fool themselves and try to fool the shareholders, we the shareholders, should do what any shareholders of a public type company like this would do: FIRE THEM! Maybe it will need to wait until the next SHAREHOLDERS’ MEETING in 2013 when I will be offering my services for tackling the extremely serious problems the past Govts. have created for us and our chidlren and maybe even our children’s children!
In the meantime, I implore the Chairman of CAL to accept that the present business plan of CAL, with the inefficient 737s, can only result in continued increasing losses (now $20 million per annum, up from $12.5 million in 2000). Every good businessman, banker, or accountant knows that the biggest mistake a business can make is to continue to operate an unprofitable model (as we are doing with our country, airline, and other entities) instead of changing the model to realize profitability or at least wind the business down giving the employees and creditors time to reorder their own business.
It looks as though they are actually bringing the real problems with CAL to the forefront. For example, I didn’t know that the airline still lost money after Government funding. I assumed that we were putting however many million into it and that each year it was netted out to zero. Truth is by not having this information sooner we have been kept in the dark.
The fact that we (the shareholders) have allowed the airline to get into a $50M hole is not the sole responsibility of any one government, party or individual. And the sad part is we didn’t even know it was happening. Selling the airline won’t make this debt disappear (ask the Jamaican Government what happened to Air Jamaicas 1.2B debt) so what are our alternatives? The curtain has now been pulled back and we see the real issues.
The CAL Chairman and Board are all very qualified and seem capable of sorting the problems out so I say let’s give them a chance. They’ve revealed the real situation for the first time and we should give them the opportunity to deal with it.
What inefficient 737 aircraft are you talking about? CAL retired theirfuel guzzling 737-200 and replaced them with new 737-500 some time ago; they now have 3 or 4 late model 737-500 which is the fuel efficient type of 737 from what I understand.
Leaving out the politics and sentiment, the airline cannot be sold to another entity or shares sold to the public with its 50 million in debt. That 50 million in debt is the Government’s responsibility, like it or not. Shutting down the airline will not erase the 50M debt either, but shutting down the airline will cost many millions to accomplish and provide no chance in hell of the airline ever paying off it’s debt. Short of the stupidity of absorbing all of the airlines debt with an IMF loan and giving away the airline to Trinidad’s Caribbean Airlines like what the Jamaican’s did with Air Jamaica, there are no more options people.
Who will employ all the Caymanian staff at the airline? Let’s lay off 300 Caymanians and see what effect it has on our economy, let’s see if it lowers your tax burden, stop and think about it.! Let’s pay American Airlines to fill the gap and see how much of the money they are paid remains in the economy to multiply, the way economies work. Lets see how many Caymanians they employ to fly and fix their planes. Lets see how many they employ to do their accounting and sell tickets and everything else.
When all this money disappears from the economy, what next? Then the Government will need to implement an economic stimulus package to put all these people to work and pump money back into the economy. At least the way it is now CAL carries a quarter million tourists to Cayman each year who spend money in our economy and provides an essential link at $100 fares to the sister islands, when ten years ago Island Air was charging $150. Oh how our memories are short!.
The new Board and Management has some of the very smartest Caymanians, let’s give them a chance, because the foreigners that have been used to run CAL in the past brought nothing to the table but hype while they all lined their pockets. They simply had no vested interest and followed the political wind like a weathercock. The current Management seems to be operating from what I hear as if they are fighting for their lives,that’s exactly the way it should be, the board is holding the management accountable but making them fight for their life, No free rides! CAL may just end up being the model for all to follow!
In reality if CAL can get by on 15 million this year, that’s actually a huge improvement over prior years if what the government says is right in that CAL was losing 20 million annually, I wonder how they know this though as CAL has not produced audited accounts for many years now along with so many other govt entities. Anyway, this may just be the one and only chance CAL has staring us in the face, Isay hold the management accountable to delivering the best possible service at the lowest possible cost and give CAL the chance it needs. At least Government can see some return for what it invests in CAL, which is not the case for much of what Government spends money on, since Government for the most part is a service provider and is not profit centred outside of the tax collecting arms of Government.
I say to the Government, it is better to pump even more into CAL and have them lower the fares to tourists (and us locals too) , fly the tourists in for free if you can, you may lose 200 or 300 on the airfare, but the tourist will spend ten times as much when he gets here. That money then circulates 5 to 6 times in the economy, go do the math! Let’s make good use of the investment, It can have a huge return on GDP.
Your facts are flawed. First, CAL doesn’t have newer 737-500 aircraft (which are really no longer new as many carriers are beginning to retire even that version). They have 737-300 all of which are at least 20 years old and not fuel efficient.
Another comment you make:
"At least the way it is now CAL carries a quarter million tourists to Cayman each year who spend money in our economy" doesn’t correspond to DOT’s own visitor arrival statistics. In 2009, there were 271,000 visitor arrivals by air. I can be certain that CAL doesn’t carry 90% of visitor arrivals!
You can check these yourself at http://www.caymanislands.ky/statistics/
Frankly, anybody who’s flown on CAL to Miami can tell you most of the passengers are Caymanians – not tourists!
Finally I wish people would stop beating up CAL to fly people for free. Why should they work for free and hope to be funded later?
Let me set you both straight. CAL operates two late1992 and two late 1996 737-300. Average age of fleet is therefore about 15 years old. These aircraft are also "low time aircraft" for their age meaning they have flown considerably less cycles than average for aircraft of the same age.
These 737-300 aircraft are still considered fuel efficient and the low lease rates currently makes these aircraft more economical to operate than newer 737 versions such as the 737-700. Additionally CAL’s maintenance standards are top notch and these aircraft are in better condition than most aircraft operated into the Cayman Islands by foreign carriers regardless of age.
I don’t know about the tourist numbers now, but CAL used to account for half the tourist air arrivals into all three Cayman Islands a few years back and flew approximately 500,000 one way passengers in total on all it’s flights combined including CAL Express.
You both may have gotten some facts wrong, but the arguments regarding CAL’s economic value and the inability for it’s contribution to be duplicated by foreign carriers are spot on. CAL is tool which if used correctly can yield awesome results, unfortunately it comes with a hefty price tag because of years of underfunding and mismanagement.
With good management and proper funding, there is still plenty hope for CAL and I think they are on the right track this time. The debt should stop growing from now on and the dependence on the Government will start to decrease while it’s value to the country increases. Let’s see where they are at in a year.
This I agree with. I feel that we need Cayman Airways. I also feel that it is possible for them to do better.
CNS: Do you know what CIG paid for the Sammy’s Inn?
Now I know that the Sammy’s allowed them to bring together:
– Admin Offices
– Reservation Offices
– Cargo Offices
But really did they need something as big as the Sammy’s building? Could they not have added to their other offices a floor and then did something to the Stores building across the street to make CAL virtually in one area?
This just seemed to me to be excess.
I’m betting this is creating issues with bank interest and loan repayments.
No doubt a discreet enquirey will tell all. Can any one be bothered?
Didn’t Mr Clifford give this information out years ago? Something like $2.5M. was supposed to save money in rent. I looks nicer that what they had before.
LOOK AT WHAT I FOUND ONLINE!
CNS: Can you just post the link rather than the whole thing. Thanks.
CNS … it would be nice if you disclosed the link as well
🙂
CNS: The url was not included in the comment and I don’t have time to look for it.