The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sunwing's financial demands were yesterday branded "madness" by a Cabinet minister, who accused it of failing to deliver and forcing all costs on to the Bahamian taxpayer.

Dionisio D'Aguilar, minister of tourism and aviation, told Tribune Business that the Canadian tour operator's 2018 summer airlift programme had produced just 6,436 of the promised 20,000 visitors to Grand Bahama.

Based on the $3m subsidy provided to Sunwing, the minister said this translated into paying more than $466 for every stopover passenger brought in - a sum that suggested 100 percent of the costs and risk were being borne by Bahamian taxpayers.

As a result, Mr D'Aguilar scoffed at the tour operator's suggestion it had "lost millions of dollars" annually in providing summer airlift to Grand Bahama, adding: "It looks like they're in the money."

Blasting the Canadian tour operator's explanation for pulling the plug on its 2019 summer airlift programme, Mr D'Aguilar said its Friday announcement was "factually incorrect" and "disingenuous". He added that its production was well short of the 30,000 visitors touted.

Describing Sunwing's approach as "very confrontational, unwarranted and mean-spirited", he suggested he would now seek to employ the incentive model agreed with Grand Bahama's ferry/cruise providers - where tax rebates were determined by the number and type of passengers brought to the island - to airlift deals with the major carriers.

Mr D'Aguilar described Sunwing's pull-out as "a bump in the road", and revealed that the Ministry of Tourism was in talks with other airlines - including Bahamasair - to replace it and craft suitable airlift/hotel packages.

He conceded, though, that the Grand Lucayan's rapid sale to a buyer able to re-open more rooms was critical to attracting more airlift. Otherwise, Grand Bahama will be caught in a vicious circle, where purchasers are deterred by lack of airlift and, in turn, airlines are put off by the lack of resort inventory.

Mr D'Aguilar revealed that Sunwing had initially sought $4m for a four-month summer airlift initiative, lasting from May to August 22, which he described as "already a lot of money" given that it amounted to $1m per month.

"I wanted to know how many passengers they were going to produce," he told Tribune Business. "They [Sunwing] said that to secure the planes and put the marketing in place, they needed $4m.

"It's common business sense to say: If I pay you $4m, what are you going to produce for me? They started off the discussion saying: 'We're good at this, we're going to produce 40,000.' I said: 'Really? Can Grand Bahama provide capacity for 40,000?'

"They said in response: 'I guess so, but we'll produce 30,000 instead'. We entered into an agreement with them to produce 20,000 for $4m. We also said that if the Memories property doesn't open, we'll pay you $3m. The odds are you will not get 20,000, and if it's less than that you will get $3m."

Mr D'Aguilar said the Government initially had high hopes for the Sunwing deal, but added: "Memories did not re-open and, at the end of the day, they brought 6,436 passengers - not 20,000.

"If you do the math, $3m divided by 6,436, that works out at over $460 per person. We [Bahamian taxpayers] paid for them to come here. This is madness. They haven't produced, and owe us some monies on the programme.

"Because of the way the payments fell, and the time of settlement, they probably owe us just shy of $500,000. They probably owe us a refund." Despite Sunwing only being entitled to $3m because of its under-performance, the Minister confirmed that the Canadian tour operator had actually been paid $3.5m.

"The have a very aggressive payment plan where they wanted a lot of it up front to secure the planes and do the marketing," Mr D'Aguilar added. "They're [Sunwing] very aggressive, very aggressive, and very difficult to do business with. They always take a very tough negotiating stance.

"When they had the Memories property open, they were producing passengers but at what cost? They never say what it cost the taxpayer to produce those passengers. Their planes ran 89 percent full from US gateways. They're saying they lost money. Hell, how could they when we paid for every passenger who came? It looks like they're in the money."

The former Christie administration, to secure Memories as operator for one of the three Grand Lucayan properties, committed to paying it and Hutchison Whampoa some $21m in subsidies per annum over a three-year period. Besides this $148m, it also guaranteed Memories' $300,000 monthly lease payments to Hutchison Whampoa.

Mr D'Aguilar yesterday served notice of his intention to seek airlift deals that are "results based", and move away from arrangements where carriers obtain significant monies up front - as in the Sunwing deal - to ones where payment is tied to performance and the number of passengers brought in.

He added that such agreements had already been reached with Grand Bahama's ferry providers, who obtain tax rebates of $5 and $10 for every day trip and overnight stopover passenger, respectively, that they bring in.

"We're trying to strike deals that we can measure," Mr D'Aguilar told Tribune Business. "Why should we pay you a fixed sum? Why not link the sum to the number of passengers produced? These companies like a fat fee upfront and we get screwed."

Branding Sunwing's statement as "shocking", he added that the tour operator's assertion that its summer airlift programme brought in 30,000 passengers was "absolutely factually incorrect" and "by no means" did that happen.

"I found it to be a very confrontational, unwarranted, inflammatory and mean-spirited press release by that lady who works for Sunwing," the Minister blasted. "To bring this all up in such a negative light, and to have made out as well as they did on the number of passengers, I don't know what they're attempting to do other than embarrass the Government."

Mr D'Aguilar was yesterday backed by Kwasi Thompson, minister of state for Grand Bahama, who said Sunwing had sought a 10 percent "escalator clause" that would have increased the Government's $4m annual subsidy every year over a seven-year period.

"The Government refused to accept Sunwing's unreasonable and uncompromising demand for the Government to pay $4m every year for a fixed seven-year period to provide airlift for four months," Mr Thompson said.

"The Government also refused to agree Sunwing's demand to increase the $4m payment by 10 percent every year. This could amount to a cost of $1m for one month, and the numbers could possibly mean the Government was in essence paying the cost of every ticket."

"No reasonable government would agree to such terms," Mr Thompson continued, pointing to the Prime Minister's statement that talks with the Canadian tour operator "came to an end because of unreasonable demands to which the Government could not agree".

He added that the Government had sought to secure Sunwing's return to the Grand Lucayan upon taking office in May 2017. Its hotel brand affiliate, Memories, had withdrawn from its Grand Lucayan operating lease in January 2017 following a dispute with then-owner, Hutchison Whampoa, over Hurricane Matthew-related repairs.

The talks ultimately proved unsuccessful with Mr Thompson revealing that, like Wynn, Sunwing refused to agree to Bahamian-majority involvement in repairs to - and staffing at - the Memories property.

"Sunwing refused to ensure that, during the construction phase, a minimum of 400 Bahamians will be employed with a ratio of 85 per cent Bahamian and 15 per cent non-Bahamian. We have more than enough qualified contractors in Grand Bahama to fill their need," Mr Thompson added.

"Sunwing also refused to ensure, during operations, a minimum ratio of 90 per cent Bahamian and 10 per cent non-Bahamian. We have more than enough qualified Bahamians to successfully operate and manage a hotel."

Mr Thompson said the Government would also not agree to Sunwing's demand to exempt it from any local advertising requirement or payment of work permit fees. "The Government could not compromise on this important point, which informs locals on what jobs are available before it can be offered to non-Bahamians," he added.

"Sunwing also refused to agree to employ Bahamian tennis and golf professionals if they were available."

Mr D'Aguilar, meanwhile, said the Ministry of Tourism was "in deep negotiations" with other carriers, including Bahamasair, to replace the airlift lost by Sunwing.

He added: "The critical thing is to sell the Grand Lucayan onward to someone who can get more rooms open and build a certain amount of scale to make it attractive. When you're running at short supply it's difficult to get airlift in."

The Minister suggested Sunwing might well return to Grand Bahama should more inventory become available, strengthening the business case for them to do so. "This is a bump in the road," he added of the tour operator's pull-out.

"Don't get me wrong, we valued every customer it brought in. We tried bloody hard to make this work, but it did not happen as agreed."

Mr Thompson added: "The Ministry of Tourism has also been clear that they are executing their marketing strategy, and they are using Bahamasair to create packages for the hotel [Grand Lucayan]. In addition, Bahamas Paradise Cruises are also working on a package for the hotel."