The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamasair and the Water & Sewerage Corporation will collectively consume $55 million in taxpayer subsidies in 2014-2015, the Deputy Prime Minister yesterday revealing that the latter has been allocated a further $15 million for this fiscal year.

That, Philip Davis told the House of Assembly in his mid-year Budget debate contribution, will take taxpayer funding for the Water & Sewerage Corporation to $35 million for the 2014-2015 fiscal year.

Mr Davis downplayed this figure, and the extra $15 million allocation, during his presentation, saying the $35 million total was less than the record $40 million annual subsidy received by the Water & Sewerage Corporation.

“While Government subsidies to the Corporation remain high, with $20 million allocated in the 2014-2015 Budget, and an additional $15 Million in operational subsidies approved, this represents a $4 million reduction over previous highs,” Mr Davis said.

“This reduction is the beginning of the Corporation transforming itself into a financially and operationally sustainable entity through improved service and efficiency. “

There is little doubt that progress is being made at the Water & Sewerage Corporation via the $81 million Inter-American Development Bank (IDB) financed project to overhaul both it and the wider water sector.

And, based on the figures disclosed by the Deputy Prime Minister, it cannot get to a sustainable position soon enough as far as the Bahamian taxpayer is concerned.

“The 2014 target for reduction in water losses was exceeded by almost one million imperial gallons per day, resulting in overall reduction of losses from 6.9 million imperial gallons per day to less than four million imperial gallons per day,” Mr Davis said.

“If the Corporation maintains its present savings, over a 10-year period more than 10 billion gallons of water will be saved. This saving in water production will be accompanied by savings of seven million gallons of diesel and 33 gigawatt-hours of electricity.

“This is equivalent energy to power over 600 households and over 800 vehicles for 10 years. That is what you call savings.”

As for Bahamasair, while touting the improvement in the airline’s financial position, Mr Davis said the airline was still on target for a near-$20 million deficit in the year to end-June 2015.

“Over the past three years, Bahamasair’s financial position has improved,” Mr Davis said.

“The airline’s annual deficit was reduced from $26.3 million five years ago to $15 million last year. This year’s deficit is projected to near $20 million. However, this year’s budget includes the recently introduced Business Licence fee and Value-Added Tax.”

The collective $55 million subsidies being eaten up by Bahamasair and the Water & Sewerage Corporation represent ‘low hanging fruit’ that can save the Bahamian people a significant sum if they are eliminated, and both entities transformed into efficient operations - via privatisation or some other solution.

With Bahamasair’s revenues on both domestic and international routes are under pressure from competition, Mr Davis highlighted just how excessive the airline’s cost base is compared to industry norms.

“Bahamasair’s labour cost is presently just over 44 per cent of total revenues, which is much higher than industry average (that is, 26-27 per cent),” the Deputy Prime Minister said.

“Uniquely, Bahamasair is associated with four trade unions representing staff locally and in Florida. Unfortunately, industrial agreements between the company and unions have expired for over three years and this gives cause for great concern. Progressive negotiations are underway with all unions, and hopefully, conclusions would be reached before June 30.”

The International Monetary Fund (IMF) has previously said Bahamasair’s staffing levels should be reduced by around 200 persons, thus explaining why its labour costs are so high.

Elsewhere, Mr Davis said the Government had approved a Bahamasair proposal to replace its five Dash 8-300 aircraft with new planes to increase capacity on high traffic routes into Freeport, Marsh Harbour and Florida. This, though, will require “significant investment”.

“Bahamasair recently had to take the regrettable decision to reduce its seating capacity on the Deadman’s Cay route from 50 to 37 seats following an international runway assessment, which determined that the hill at the eastern end of the runway poses a challenge to safety if the aircraft exceeds a specified weight,” Mr Davis added.

“This represents a significant financial loss to Bahamasair as it serves Long Island on a daily basis. In fact, this restriction accounts for 4,745 seats annually. Going forward, Government may need to consider whether expanding the runway at the western end is feasible so as to restore the airport and airlines to desired capacities. Alternatively, consideration may be given to building a new airport at another site.”