The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamasair’s revenues for the ten months to end-April 2021 plunged by 84 percent year-over-year, a Cabinet minister revealed yesterday, with taxpayers set to underwrite its survival via a $60m-plus subsidy.

Dionisio D’Aguilar, minister of tourism and aviation, disclosed in his Budget debate contribution in the House of Assembly the extent to which the Public Treasury has had to prop up the national flag carrier due to COVID-19’s devastating impact on international air travel.

“To say that fiscal 2020-2021 was a challenging year would be an understatement,” he admitted. “There was great hope for Bahamasair as the company saw its revenues for the fiscal year 2019 climb to $92m, with revenues forecast to exceed the $100m mark for the first time ever in 2020.

“During the last 15 or so months of COVID-19, the airline was either completely shut down or operating at less than 35 percent capacity when compared to pre-COVID rotations. This resulted in revenue streams of only $60m for 2019-2020 and $12.8m for July 2020 to April 2021. The $60m represented a 27 percent reduction, and the $12.8 million an 84 percent reduction in revenue when compared to fiscal year 2018-2019.”

As a result, Bahamasair’s need for financial subsidies had risen to an unsustainable level during the current fiscal year. “Bahamasair, as a state-owned enterprise (SEO), has proven a continual drain on the country’s finances. During the fiscal year 2020-2021, to-date Bahamasair would have received a subvention of $60m-plus. This has been to both support operations and the retention of employees.

“In this upcoming budget cycle, fiscal year 2021-2022, the Government is allocating $30m to Bahamasair. This is due to prolonged suppressed operations resulting from COVID-19. However, we are specific in how this support should be used.

“Twenty million dollars will be used to fund the ATR loan structure, and the remaining $10m will assist with operational support for the Family Islands. The Government understands that the airline will not fully recover from the effects of the pandemic until there is a complete return to Bahamasair’s full schedule complement of flights.”

Mr D’Aguilar said the combined impact of COVID-19 and Hurricane Dorian had inflicted “a disastrous impact” on both Bahamasair’s operations and the Government’s ambitions to drive it towards self-sufficiency and profitability - a goal many will be sceptical that it can ever attain.

With staff wages and other compensation accounting for 27 percent of Bahamasair’s total costs, the minister said the airline had managed nevertheless to generate $7.5m in annual savings via an early retirement initiative and not replacing persons who left its employment.

“With the introduction of many of the new automated proceeds, there was a need for a comprehensive review of Bahamasair’s human resources, and the ways in which persons were utilised,” Mr D’Aguilar added.”Over the past four years, through a process of attrition and an early retirement programme that ceased on May 31, 2020, the airline has been able to reduce its headcount by 151.

“There are now currently 507 employees at Bahamasair. This relates to a 23 percent reduction in staff with an average savings of some $7.5m each year. It is noted that that this reduction was accomplished through the regular attrition process of retirements, voluntary early retirements, and separations running concurrently alongside a laser-like focus on new hires.”

Noting what he described as “a marginal” increase in ticket prices and baggage fees from January this year, which was the first in nine years, Mr D’Aguilar said: “These adjustments are expected to provide an additional $7.3m in annual savings when full operations resume.

“The airline is already reaping the benefits of the $7.5m in reduced staff costs and is looking forward to the added $3m in savings owing to the introduction of the Crane Passenger Service System. They are also looking forward to enhanced revenues of some $7m from adjusted pricing of services once full-service resumes.”

Elsewhere, Mr D’Aguilar said the Department of Aviation was preparing bid documents to seek a private sector partner to develop Cat Island’s New Bight airport via a public-private partnership (PPP). That Request for Proposal (RFP) is expected to be released by September 2021.

And the first “market briefing” for bidders interested in developing and operating Grand Bahama International Airport, plus the airports in Exuma, North Eleuthera, Great Harbour Cay, San Salvador, Abaco and Long Island, is due to be held before the end of June.

“We have created two SPVs (special purpose vehicles), Freeport Airport Development Company or FAD, and the Bahamas Airport Development Company or BAD, that will operate both the Freeport and other already identified Family Island airports independent of the Airport Authority in much the same way as NAD manages LPIA,” Mr D’Aguilar added.