BWIA profits nosedive in 2005

WEST INDIES Stockbrokers CEO Peter Clarke yesterday said an 80 percent nosedive in BWIA’s operating profit during the third quarter of 2005 was bad news for shareholders. WISE indicated in its December 16 weekly market report that while the airline’s operating revenue for the third quarter of 2005 experienced a 4.9 percent improvement over the corresponding period in 2004 (US$76 million in 2004, US$79.7 million in 2005), “the operating profit dropped by 80 percent from US$4.1 million to $0.83 million.” The WISE report said BWIA’s operating expenses increased from US$71.9 million to US$78.9 million “driven mainly by a US$6.2 million or 36.45 percent increase in fuel costs.”

The report further indicated that while BWIA’s net non-operating profits decreased from 6.47 percent to US$0.87 million during the third quarter of 2005, “the reduced operating profit was insufficient to cover even these reduced costs, resulting in a loss before taxation of US$35,000.” Clarke said while the third quarter of the financial year is “normally strong for airlines, ” BWIA’s performance during third quarter 2005 broke with tradition. He believed that uncertainty over the direction of Government’s proposed reform of the airline may have contributed to the performance of BWIA’s stocks over the July to September 2005 period. Government must clearly state its plan to transform it into a viable entity, Clarke said.

BWIA’s shares were suspended from trading on the local stock market in November for a period of three months but Clarke said this had nothing to do with the airline’s performance. He said the TT Stock Exchange had a responsibility to ensure that shareholders had all the relevant information regarding all stocks being traded on the market.  He said this was the case with BWIA’s shares and was optimistic that either Government or the airline would clearly articulate what were the reform plans for BWIA. Trading of the airline’s shares is expected to resume on the market sometime next year.  Clarke also said the suspension of BWIA’s shares from trading on the stock market will have no negative impact on the airline’s daily operations. The only persons affected would be the shareholders since they have no idea of the direction which BWIA could be taking, he said.

Taxation charges for third quarter 2005 were US$0.41 million and an outflow of US$0.14 million attributed to minority interest drove BWIA’s group loss after taxation to US$0.588 million compared to a group profit after taxation of US$2.8 million in third quarter 2004. In his September 28 Budget presentation in Parliament, Prime Minister Patrick Manning announced that BWIA will be restructured into a regional carrier in which both regional governments and private sectors would be able to purchase equity. Government injected US$250 million into BWIA for re-capitalisation purposes and businessman Arthur Lok Jack was appointed chairman of BWIA’s new board of directors. The WISE report concluded that in the absence of clear information, “we maintain our opinion that BWIA is a high risk stock with very low fundamental value.”