RAMESH LUTCHMEDIAL
AT A virtual news conference on June 15, Minister of Finance and Corporation Sole Colm Imbert stated that the Government cannot bail out Caribbean Airlines (CAL) to the tune of $700 million in 2021 “unless the airline gets itself ready and makes itself as efficient as possible for resumption of flights.”
The minister further stated that whatever system is put in place to allow the resumption of flights, CAL will be required to make a presentation to the wider public and let everybody know what the restructured airline would look like because the Government cannot spend another $700 million of taxpayers’ money on CAL.
On June 21, CAL announced a loss of, according to its unaudited financial results for the first quarter of 2021, $172.7 million (US$25.7m) and a 75 per cent decline in revenue, compared to the same period in 2020. The losses follow a similar downturn in 2020, which saw an operating loss of $738 million (US$109.2m) compared to operating profits for 2018 and 2019.
According to CAL, until air travel regains its pre-covid19 momentum, the airline will need to adjust its operations as passenger demand in the short to medium term is not going to recover sufficiently to support the existing company structure after the reopening of the borders.
CAL added that it is required to take further steps to ensure it has a sustainable business model for 2021 and beyond. These steps include major cost reductions in all areas of operation, specifically its human resource complement, its fleet and other assets, and its route network.
The objectives of CAL’s strategic plan were premised upon, among other things, the replacement of the ageing Boeing 737-800 fleet with the more fuel-efficient and technologically-advanced Boeing 737 Max aircraft. However, the worldwide grounding of the Boeing 737 Max fleet and the covid19 pandemic, over which the airline had no control, significantly impacted the objectives of its strategic plan and negatively affected its projected financial results.
While CAL proposed actions in restructuring to become more efficient are strategically correct, there are some critical areas that the Government should consider.
A critical area for consideration is management autonomy. CAL is a majority-owned state enterprise incorporated under the Companies Act and reports to Corporation Sole. The airline is required to comply with the requirements of the state enterprises performance monitoring manual as underscored by the initial and follow-up reports on CAL by the Joint Select Committee on State Enterprises laid in Parliament.
The basic realism of the airline industry is that it is very dynamic, capital intensive, hyper competitive and highly regulated due to stringent international safety standards. Most of CAL’s operations are outside of TT in foreign jurisdictions where it must comply with a plethora of rules and regulations. This requires rapid real-time tactical and strategic business decision-making. The manual requirements can hinder efficiency at CAL and stymi
