The state-owned Caribbean Airlines (CAL) recorded losses estimated at US$70 million last year, Finance Minister Larry Howai has said.
He told the Senate on Tuesday that the figure does not include the US$40 million in fuel subsidy to the airline even though he insists that the airline remains solvent.
Government has made certain provisions for the airline to restructure its balance sheet. One of the things they have done is to use a lot of their cash to actually do acquisitions of the planes and I have instructed a new restructuring of the balance sheet where you would need to borrow and replace the cash which was being used.
It's better to leverage the assets rather than leave it unencumbered but having the company incurring significant debt obligations, Howai added.
But Opposition legislator Dr. Lester Henry said he was astounded that the minister could describe as solvent a company which cannot cover its costs and no money in the bank.
But Howai insisted that while the company may be cash-strapped but it had assets.
Perhaps the decisions made in respect of how those assets would be leveraged and what kind of leveraging you have for the balance sheet were not addressed perhaps in the way that others might have done,
Howai said the preliminary unaudi_ted figures showed US$32 million of the $70 million loss was incurred by the Air Jamaica route, with the London route also accounting for a major part of the losses.
Caribbean Airlines, which began operations in 2007, acquired Air Jamaica in 2011. The Jamaican Government has a 16 per cent stake in the Trinidadian air carrier.
On the Jamaica route, it has cut flights to Jamaica and on the London route, it has terminated the wet-leasing arrangement, Howai said, adding he expects to significantly reduce the losses of the airline during this year.
The finance minister said the airline used a lot of its cash in the acquisition of planes and that he had instructed that a new restructuring of the balance sheet be done where the airline would have to borrow and replace the cash which had previously been used.
It is better to leverage the asset rather than leave it unencumbered while having the company incurring significant debt obligations.
Howai said the US$40 million fuel subsidy applies to Air Jamaica and CAL. He said it was the same as last year and would end in 2015.
Howai said government had received from CAL a restructuring outline to deal with the losses, adding we also intend to introduce significant restructuring of a lot of the routes and we have started that process with Air Jamaica and the Jamaican route. We incurred a loss of $32 million on those routes.
The Jamaican government has indicated concern with that and we have undertaken to send a high level team to Jamaica to discuss it with them (early June). We'll discuss it with them but as of now we are rationalising those routes to bring down costs.
A second major area of cost for the airline was the London route. He said CAL was leasing two sets of aircraft which contributed significantly to the losses and those losses have been terminated. This will significantly reduce the overall loss, he added.
So I expect we should be able to significantly reduce overall losses within the course of the year, he said, predicting that the airline should be able to return CAL to some measure of viability going forward.
In 2011, CAL had recorded losses of USE43.7 million.