The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government’s decision not to proceed with the Nassau Flight Services (NFS) privatisation is no reflection on the two final bidders’ quality, a top aviation official revealed yesterday.

Algernon Cargill, director of aviation, confirmed to Tribune Business that the Minnis administration had decided to cease efforts to sell-off the state-owned ground handling services provider for the time being.

He added that a fresh public bidding process would have to be initiated should the government decide to revisit a privatisation that was billed as the first of several such efforts to reduce the state’s involvement in business and, in so doing, boost Bahamian entrepreneurship and opportunities for local wealth creation.

However, Mr Cargill argued that the last two bidders’ offers were not “rejected”, instead saying the government had merely “put off” or deferred taking any decision on the Nassau Flight Services sale “at this time”.

He praised both bids as “very strong”, adding that he did not want their “quality to be dampened” by the Minnis Cabinet’s decision not to push forward with a privatisation that was signalled within months of it taking office in May 2017.

“The government decided not to make a decision at this time,” Mr Cargill said in response to Tribune Business inquiries, after this newspaper was informed that the process had ended without a preferred buyer being selected.

“I would definitely say the bids weren’t rejected. We had two quality bids, and the government has decided not to make a decision. For this request for proposal (RFP) it’s been put off. If a decision was made to revisit it, we would have to issue a new RFP.”

Mr Cargill added that he and members of the Government-appointed evaluation committee, which oversaw the bidding process and analysed all offers before submitting their recommendations, “were not aware of the rationale for the Cabinet’s decision but respect it”. He added that both bidders had been informed of the verdict, which is understood to have come at this week’s Cabinet meeting.

The aviation chief declined to identify the bidders, but Tribune Business previously reported that one offer had been submitted by a group featuring Colin Ingraham and Robert Pantry, the former Royal Bank of Canada (RBC) and Scotiabank banker, with supported from RoyalFidelity Merchant Bank & Trust.

Dionisio D’Aguilar, minister of tourism and aviation, could not be reached yesterday to explain the rationale for the Cabinet’s decision not to proceed with a privatisation process much-touted by himself.

However, sources close to developments, speaking on condition of anonymity, suggested that the Minnis administration had backed off for fear that any buyer would likely need to significantly cut Nassau Flight Services’ 244-strong workforce given Mr D’Aguilar’s previous revelation that its wage bill was equivalent to 99 percent of its revenue.

Job losses, they added, would not be the Government’s desired outcome as it starts to gear up for a general election in which it will likely need every vote possible. “I don’t think it had anything to do with the quality of the bids, and was more to do with the political consequences,” one source said.

“The Cabinet turned it down and agreed to keep it with the Government for the time being, so nobody is going to win anything. I think the reasons were that politically it did not make sense to lay-off lots of people at this time, and they agreed to defer it.”

Mr Cargill, meanwhile, yesterday went to great lengths to praise the two final bidders. He said: “The proposals were very strong, and the Government did not decide they were not meritorious.

“I don’t want to dampen the quality of the bids. The bids were strong, and they did a great job representing their companies, but at this time the Government decided not to move ahead.”

He added: “As explained in the RFP, there was no commitment we had to sell. We were working on the understanding the whole time that our committee was advancing a recommendation. We were only charged with making a recommendation. We were happy with the process, the RFP, and made a recommendation based on the information we had.”

Mr Cargill declined to detail the recommendation from the evaluation committee, which included himself; former Central Bank governor, Wendy Craigg, who now chairs the Bahamas Civil Aviation Authority (BCAA) Board; Walter Wells; accountant Philip Stubbs; and Ryan Sands, an attorney with the Attorney General’s Office.

Upon taking office, the Minnis administration made it clear that it viewed Nassau Flight Services as “low hanging fruit” when it came to privatisation, outsourcing and getting the government “out of business”.

It also saw the privatisation as part of its drive to create more Bahamian entrepreneurs, diversify the economy and spread the wealth, insisting that foreign bidders need not apply given that Nassau Flight Services’ size - with annual revenues of $8m - made it a prime candidate to remain in local hands.

However, Cabinet’s decision means this strategy will not be executed - at least for now. The company, which provides ground handling services at Lynden Pindling International Airport (LPIA), Exuma and San Salvador airports is a consistent loss-maker that represents an annual burden on Bahamian taxpayers although this is modest compared to other state-owned enterprises (SOEs).

Nassau Flight Services is due to receive a $1.8m subsidy for the 2019-2020 fiscal year, with this sum set to increase to $2m in 2020-2021 and to $2.05m in the subsequent two fiscal years, thereby keeping it firmly on the taxpayer’s payroll.

The privatisation tender document also laid out relatively modest growth prospects. Revenues from Nassau Flight Services’ main ground handling business are projected to grow at 2 percent per annum over the next decade, increasing from an actual $6.251m in 2018 to $7.62m in 2028.

“NFS has managed an average of 6,600 flights during the period 2015-2018, and is projecting a two percent annual growth over the next ten years,” the bid documents added. “NFS has managed an average of 6,600 flights during the period 2015-2018.”

The number of flights handled by Nassau Flight Services is also forecast to increase from the 6,850 handled in 2018 to 8,350 by 2028 - an increase of 1,500 annually, or 21.9 percent - which matches the level of revenue growth.

A downsizing of Nassau Flight Services’ 244-strong workforce, featuring 166 full-time workers and 78 temporary staff, was almost inevitable post-privatisation given the need to better align costs with income. This, though, would not have been easy given the presence of trade unions via the Airline, Airport and Allied Workers Union and an existing industrial agreement.

Nassau Flight Services’ client base comprises British Airways, Air Canada, West Jet, Sunwing Airlines, InterCaribbean Airlines, Caribbean Airlines, COPA Airlines and Cubana Airlines at LPIA’s international terminal, and Jet Blue, Southwest Airlines, United Airlines and Silver Airlines at the US terminal.

It also serves a host of charter and other operators, including Air France and Condor, while in Exuma it serves Air Canada and takes care of American Airlines and Air Cariabes in San Salvador.