Playing politics with CAL
By Raffique Shah
May 13, 2012
Anyone with a modicum of commonsense would have laughed off the pronouncement some months ago that cash-strapped, debt ridden Caribbean Airlines (CAL) was on course to make a profit of $200 million. And if you had a sense of humour, you would have rolled on the floor—or cried like a baby—when chairman George Nicholas pledged US$5 million from the anticipated profit to the Prime Minister's Children's Life Fund. Really, if they believed that, George and his fellow directors (well, none of them expressed a dissenting view) could have made twice times the ghost profit staging their own comedy show in the stadium.
Then again, this is Trinidad and Tobago where everything is a joke. Seriously, though, it is not that we citizens do not want CAL to make a profit. Hell, the amount of taxpayers' dollars we ploughed into BWIA, LIAT, sundry air-bridge operations, and more recently Air Jamaica and CAL, we could use some good news—and a few dollars on the black-ink side of the balance sheet. Maybe chairman George, in proclaiming $200 million, meant an operating profit, which, as a businessman, he must know is quite different to gross profit, and most certainly after tax profit, if the airline's balance sheet gets that far.
The twice-resigned chairman, a charmed office-holder if ever there was one, has blasted naysayers and Finance Minister Winston Dookeran for mucking up his CAL numbers. In one fell swoop, Dookeran turned George's profit into a loss, making the ex-chairman look like a fool. In jumped the previous chairman, the Midas-like Arthur Lok Jack, telling a tale of significant cash reserves his board had left behind, and laying blame for the airline's misfortunes somewhere between Jamaica and France, meaning the acquisition of Air Jamaica (he said that involved no cash transfers) and a number of turbo-prop ATR aircraft.
In the midst of this muddle, taxpayers like you and I must wonder who is lying, who is telling the truth—if anyone—and who is playing smart with foolishness. There are many who, in the face of these contradictory statements, would say, "Privatise CAL! Ditch Air Jamaica! Let every airline fly on its own wings!"
Okay. But who would rush to buy an airline that has lost money over many years, and which, from what we garner, is steeped in debt and incurring more daily? Unless we are prepared to dispose of its assets as a donation to some wealthy investor the way the NAR government (I believe) sold the billion-dollar, debt-ridden, money-losing (sounds familiar?) iron and steel plant (ISCOTT) to Lakshmi Mittal, a deal that launched the biggest steel empire in the world, who the hell would want to buy CAL?
People point to the fuel subsidy that CAL enjoys, which, our Caribbean neighbours say, makes for unfair competition. Maybe. But do we not benefit from even greater fuel subsidies, all of us, whether we own vehicles or use public transport? Indeed, Trinidad and Tobago's is essentially a subsidised society—most utilities, LPG, public transport, ferry services and yes, even the ride on a CAL aircraft between Tobago and Trinidad. In this regard, when we point one finger at CAL, four are pointing back at us.
The dilemma we face with CAL is if we decide to ditch the airline because of its burden on the Treasury, who or what would fill the breach? Airlines across the world are streamlining their operations in the face of unprecedented economic challenges. Within recent times we have seen mergers, hence the rationalisation of operations (in the USA alone, United and Continental, Delta and Northwest, Southwest and AirTran). American Airlines is using bankruptcy loopholes to trim some fat. Globally, airlines are ditching unprofitable routes, slicing staff, generally becoming leaner and meaner.
And many of them made profits in 2011, though not as bountiful as they did in 2010. According to a New York Times report earlier this year, the top five operators in the USA posted profits. "Their recipe for success has been straightforward: fewer airlines, fewer planes and fewer seats combined with higher ticket prices and more fees." By September last, IATA was projecting 80 per cent lower profits (than in 2010) for Asia-Pacific carriers, 75 per cent less for the Europeans, an 80 per cent drop for the Middle East, and some growth but a similar outlook for Latin American carriers.
I am in favour of us keeping CAL afloat, but we need also to withdraw our heads from the clouds. Most importantly, we need to temper political interference in the airline's operations. Oh, we will never be able to eliminate the temptation for those in power, whoever they may be, to want to fly high, to come up with pie-in-the-sky ideas on the direction of the airline. For example, we taxpayers do not know if the acquisition of Air Jamaica was a good deal for CAL, whether it meant better service in the region or the prospect of profit through the merger as I pointed out earlier with certain US operators.
On service in the region, let me ask a stupid question. When last I checked, it cost almost as much to fly PoS-Kingston or PoS-St Maarten as it does to fly PoS-Orlando. Isn't something radically wrong here? Does this skewed system not hamper rather than help regional travel, hence tourism? Another stupid question: the Dominican Republic, the Bahamas and Cuba are three of the biggest tourism markets in the Caribbean, so why does CAL not fly to any of these destinations?
Yet, based on politics, CAL is considering direct flights to India and South Africa! Look, George, in your third coming, quit playing politics and run the airline like a business, not a Vasco da Gama blind expedition.
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