CAL waits on Budget Politics challenging subsidy removal

Business Day has learnt that persons at the Ministry of Finance who deal with CAL’s affairs have been pushing for the removal of the subsidy, in much the same way they are advocating for the complete removal or at least a reduction in the subsidy on gasoline and diesel fuel.

Reading between the lines of recent statements made by Minister of Finance and the Economy Larry Howai, it would seem that the country has no choice but to brace for a reduction in the fuel subsidy which is now closing in on $4 billion by the end of the year. It should not be surprising therefore, if there is some tampering with CAL’s subsidy with either a partial or complete removal.

Reliable sources at the Ministry of Finance have hinted that there was a move to take away the airline’s fuel subsidy entirely, but such action could throw the airline into a drastic tailspin. It was also hinted that if the subsidy was in fact removed in its entirety, the airline would be provided with millions of dollars in additional capital to assist in reducing its indebtedness, a move which would be most welcome by the new board as it attempts to halt the carrier’s downward slide.

But it would seem that this did not go down too well with the political directorate, which does not believe that such a move would be the right one at this time. Removal of the subsidy could see an immediate jump in fares to most if not all destinations and which would put the airline at a disadvantage against its competitors although airline sources insist that fares would remain pretty much the same as they are now.

Then there was the threat of Guyana pulling the “flag carrier status” it recently gave to Caribbean Airlines, because of excessively high fares, but this was partly resolved last weekend following talks in Georgetown between the Guyana Government and CAL team led by Chairman Phillip Marshall, who promised the revisit CAL’s fares to and from Guyana.

Over the past year or so, the subsidy has raised the ire of Dr Ralph Gonsalves, Prime Minister of St Vincent and the Grenadines, and who is also chairman of the shareholder governments which own LIAT. He has been so upset that he has continually threatened to take the matter to court for a settlement.

Gonsalves has made the point on several occasions that the CAL subsidy did not allow for a level playing field and suggested that LIAT should be allowed a similar or some kind of subsidy to allow for fairer competition.

More recently however, a powerful lobby representing airlines in the United States has raised objections to the CAL subsidy and has filed an objection with the US Department of Transportation (DOT) to stop CAL’s direct flights between New York’s JFK International and Guyana’s Cheddi Jagan International near Georgetown, which CAL recently began servicing with its B-767 aircraft.

In a response to the objection submitted by the lobby group Airlines for America (A4A), CAL’s Times Square- based attorney John Maggio of the firm Condon and Forsyth pointed out that “CAL has the full support of the Government of Guyana and its Ministry of Foreign Affairs for the service between JFK and Georgetown. Moreover the granting of the application will benefit US customers and the public interest -: 1) there is a compelling need for service in this market; 2) there would be minimal impact on US carriers in the JFK-GEO market; and 3) CAL’s operation would be minimal in scope and duration.”

Maggio further wrote that CAL was the only carrier offering this non-stop service at this time, since US carrier Delta Airlines curtailed service on May 13 last. He also pointed out that the present service (JFK-POS-GEO is impacted by an unproductive leg (POS-GEO) with load factors of less than ten per cent. Permission to operate non-stop between JFK and Georgetown would increase load factors, which can contribute to the lowering of fares for US passengers and reduce delays on the Port-of-Spain layover.

Meanwhile the new CAL Board under the leadership of Phillip Marshall is working assiduously to straighten out things at Iere House, Piarco. As a matter of fact Business Day was told there is a board member who has an almost daily presence at the airline’s headquarters, operating almost like an executive director in an obvious effort to fast track the board’s plans

Last week Shiva Ramnarine, the airline’s Chief Financial Officer (CFO) who Business Day understands was still on probation, was fired when it is said that certain directors were having problems with the new Transformation Plan as articulated and approved by the former Moonan-led board.

Earlier this year former CFO Andre Mills quit the organisation and just weeks ago Robert Corbie who was acting as Chief Executive Officer for close to three years resigned and returned to Canada. Under the old board, it is understood that efforts were being made to woo former BWIA vice-president Michael Dolsingh to accept the CEO position. Dolsingh accompanied Trade Minister Vasant Bharath to Jamaica recently as part of the official team for talks with the Jamaican government dealing with some aspects of the Air Jamaica operation

The new board however, comprising several accountant, is taking its responsibilities seriously as it works to turn around the ailing carrier. This could prove quite difficult if the airline loses its subsidy.