The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Despite slashing losses by almost 34 per cent for its 2014 financial year, Bahamasair’s best-performing international route is set to take a major hit from the new US opening with Cuba.

The national flag carrier’s annual report for the year to end-June 2014 illustrates the continuing competitive and cost pressures it faces, given that its Nassau-Havana flights generated the strongest load factors - 81 per cent - of any international route.

The new aviation agreements signed between Washington D. C. and Cuba, permitting US airlines to fly to the Bahamas’ western neighbour, will likely result in a significant demand for Bahamasair’s Havana service.

The situation highlights the major obstacles standing between Bahamasair and profitability, and the fact several key factors lie outside its control.

Still, for the year to end-June 2014, the airline managed to cut its losses by 33.9 per cent or $8.074 million year-ovr-year, dropping them from $23.788 million to $15.714 million.

Bahamasair’s losses would have been further reduced had it not been required to pay a $1.086 million Business Licence fee for the first time.

Many observers, especially rival privately-owned airlines, will argue that the national flag carrier should have been paying this fee long before to ensure a ‘level playing field’.

Bahamasair now joins the ranks of other high turnover, low margin businesses that the revenue-based Business Licence fee disproportionately impacts.

The airline, though, said the $2.799 million increase in 2013-2014 operating expenses would have been as low as $200,000, had it not been for the Business Licence payment, increased Immigration and Customs charges, and expenses related to pilot training.

While sceptics and cynics will doubtless laugh at the title of its 2014 annual report, ‘Soaring to New Heights’, the reduced losses do represent progress of sorts.

Bahamasair’s 2013-2014 losses were actually less than the $17.064 million taxpayer subsidy granted to the airline by the Government, which resulted in its ‘negative net worth’ being reduced by almost $1.35 million.

While that subsidy was lower by almost 13 per cent year-over-year, dropping from $19.636 million the year before to $17.064 million, Bahamasair continues to bleed the Public Treasury and the Bahamian taxpayer.

The end-June 2014 financial statements, audited by HLB Galanis & Co, contain the now standard ‘emphasis’ of matter, showing that Bahamasair has cost the Bahamian people a total $555.124 million (more than half a billion dollars) to keep flying.

Pointing out that the airline had a $23.524 million ‘current’ solvency deficiency, up slightly from the year before, the auditors concluded: “These conditions, along with other matters... indicate the existence of a material uncertainty, which may cast significant doubt about the company’s ability to continue as a going concern without the continued financial support of the [Government].”

Elsewhere, Bahamasair’s on-time performance dropped to 53 per cent compared to 61 per cent for the 2012-2013 financial year.

However, the airline said “other key indicators trended in the correct direction”, with customer complaints down 8.04 per cent to nine per 10,000 passengers.

Complaints totalled 789 out of a total 835,686 passengers, while baggage claims also fell by 11.6 per cent to 228 - 0.27 per 1,000 customers.

Bahamasair’s in-house fleet checks were said to have saved some $3.72 million for the carrier in the five years to end-June 2014, with the maintenance department coming in 11 per cent below its $16.8 million budget for the latter year.

Total revenues for 2013-2014 stood at $82.41 million, up 15.7 per cent or $11.152 million from the year before.

“Passenger revenue increased by $10.377 million (16 per cent), occasioned by a 21,476 (2.7 per cent) increase in passengers carried for a $1.7 million favourable volume variance,” the annual report added, “and a $10.33 (3.9 per cent) increase in average fare for an $8.7 million favourable price variance.”

Bahamasair said the 2013-2014 revenue growth “outpaced the airline’s revenue run rates over the past five years”. Higher fuel costs, and reduced market seat capacity, also drove the increase.