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Bahamasair: $22m Loss Maker Guilty Of Predatory Pricing

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Randy Butler

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Minister of Tourism’s recognition that Bahamasair’s multi-million dollar taxpayer subsidies enable it to undercut rivals was yesterday branded “critical to the survival” of private Bahamian airlines.

Captain Randy Butler, Sky Bahamas’ chief executive, told Tribune Business that Dionisio D’Aguilar’s remarks showed the Minnis administration understood how Bahamasair was able to “shock the market” through subsidies that enabled it to keep ticket prices “artificially low”.

Revealing that he would “really consider suing” the national flag carrier for predatory pricing “if I had the time”, Captain Butler yesterday said Bahamasair’s taxpayer funding enabled it to price tickets up to one-third below cost.

The Sky Bahamas’ chief was reacting after Mr D’Aguilar validated his long-standing criticisms about how Bahamasair is able to distort the domestic aviation market via its ‘bottomless well’ of government funding.

“These enormous subsidies to Bahamasair are allowing them to keep prices artificially low to the detriment of the private operators that are struggling to survive in the air transportation business in the Bahamas,” Mr D’Aguilar told the House of Assembly.

“I intend to sit down with all parties to see how they can all operate and remain financially viable despite the subsidies passed on to Bahamasair by the state.”

Captain Butler told Tribune Business he was “ready to go” in response to Mr D’Aguilar’s meeting invitation, and praised the Minister for saying something his predecessors would have tried to conceal.

“Let’s say that he was bold enough and candid enough to say some of the things he said,” the Sky Bahamas chief said, “which gives the impression he’s trustworthy.

“Folks in the past would have tried to hide that story, so we’re going to sit at the table. When he calls, we’re ready. I’m ready to go.”

Such talks will occur against a backdrop of increasing losses at Bahamasair, with the ‘red ink’ for the year to end-June 2017 projected to exceed $22 million - a 32.5 per cent (almost one-third) increase on the prior year’s $16.6 million loss.

Increasing losses likely mean increased taxpayer subsidies to fill the ‘hole’, and Captain Butler said this made it even more vital to address the distortive effects Bahamasair has on other airlines.

“It’s critical. It’s the survival and continuation of the airlines,” he told Tribune Business. “I think you would see a number of us asking the vendors to give us a little more time on our payables, which we used to settle in 15-30 days.

“The Government that you pay your fees and taxes to are the same ones dropping and creating the issue in the market.

Revealing the impact of Bahamasair’s decision to cut round-trip air fares to Abaco and Freeport to $120 earlier this year, Captain Butler said such prices had not been seen since 2008.

“Aircraft went out with two-three people on them,” he recalled. “We were putting them out on time, and people were prepared to wait with their lunch boxes for Bahamasair because the price was significantly better.

“Just to stay in the thing and continue, even with 45-50 per cent load factors round trip, you’d need to have ticket prices around $181. We couldn’t understand them going down from $200 to $120. That was a shocker to the market. Even the hackers felt it; everyone felt it.

“When you charge $120 in these kind of times, it’s artificial. Bahamasair couldn’t continue with it; it could not be sustained. They went back to their regular fare, and said it was just to get people in the door. But it depresses the market, and it’s kind of hard to get prices back up.”

Captain Butler said Bahamasair’s discounting tactics, especially as an airline financed by taxpayer subsidies, would not be permitted by law and regulators in countries such as the US.

“If I had the time I would really consider suing the Government and Bahamasair for predatory pricing practices,” he told Tribune Business. “There are agencies in the US that look at this kind of thing.”

Mr D’Aguilar yesterday attributed Bahamasair’s increased losses to $1.9 million in pilot training costs for the five-strong ATR fleet, plus $5.8 million in closing costs associated with the loan that financed the planes’ $120 million acquisition.

The Minister, who has responsibility for the airline, suggested its losses would increase once repayments on that loan kick-in from September 2018 onwards.

“We must reduce its enormous losses,” Mr D’Aguilar emphasised. “It is completely within the realm of any right-thinking Bahamian to ponder when enough is enough.”

He also blamed Bahamasair’s financial position on deeply-rooted structural flaws stemming from too much political interference in the decades since the airline’s 1973 creation.

Mr D’Aguilar said the national flag carrier employed 690 persons to handle just eight aircraft, a ratio of 86.25 workers per plane. And staffing costs eat up 42 per cent of its revenue, a ratio almost twice the industry’s 20-25 per cent average.

“The sad fact, Mr Speaker, is that when politicians control companies there is a tendency to over-staff under the belief that somehow that secures votes and victory at the poles,” Mr D’Aguilar told the House of Assembly.

“Time and time again that has been proven wrong, and I wish that all politicians would stop meddling in the workings of state-owned companies to the detriment of the taxpayer.”

However, Mr D’Aguilar revealed that he had undergone something of an ‘epiphany’ in relation to Bahamasair, having taken office with the position that he would not support the airline “because of its enormous burden on the state”.

However, the Hurricane Irma evacuation and tours of Bahamasair’s facilities have now convinced him it plays “a vital national security and nation building role”, while providing Bahamians with jobs and careers in aviation.

To improve Bahamasair’s performance, the airline opened a new route to Cap Haitian on September 5. However, the planned opening of its Houston service on November 15 is now being “evaluated” due to Hurricane Harvey’s impact.

Comments

bogart 2 months, 1 week ago

Bizzare that the airline should be subsidized to undercut local businesses and have Bahamians shop in Miami in an industry where every few years the people have to be taxed to buy new aircraft VERSUS investkng the money in local manufacturing and agriculture where these areas have unlimited growth potential and at the same cutting our import bill.

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John 2 months, 1 week ago

SEARS (Canada) has announced that it will close all of its locations in Canada. And in the main time retailers in the US continue to struggle. Many famous brand and stores will be closing outlets through 2020:

. For the retail industry's brick-and-mortar stores, the realities of online shopping and changing tastes have driven down sales, causing hundreds of locations to close their doors. So what's the status of the stores making headlines these days? Here's a quick guide: Abercrombie & Fitch: The preppy classic clothing store is closing 60 U.S. stores during the 2017 fiscal year as leases expire, CNBC reported. This follows the closing of 53 domestic shops last year and likely won't be the end of it. The company has more than 700 locations, and half of them have leases that will be up for renewal by the end of fiscal 2018, lending the option to more closings. Aeropostale: The teen clothing store filed for Chapter 11 bankruptcy in May 2016 after losing money for 13 consecutive quarters. They announced the closing of 154 of its approximately 800 locations, with 113 closings in the U.S. and all 41 Canadian locations closing. In a negotiating fight that lasted into fall 2016, the company was able to save 504 stores and keep them operating, saving 26 percent more stores than it had initially projected would stay open. American Apparel: The signature "Made in the USA" California-based brand will be closing all 110 of its stores by the end of April, CNBC reported. On Jan. 10, a Canada-based company won the auction of rights to the brand but has indicated that it will not take on any of the 110 stores, causing American Apparel to begin shutting them down. American Eagle Outfitters: American Eagle has been struggling as sales have been dropping in the last few years. In 2013, the company announced it would close 150 of its approximately 1,000 stores over a three-year period, Reuters reporter. Barnes & Noble: The bookstore will close its Bethesda, Maryland, location at the end of 2017. Barnes & Noble only closed eight stores in 2016 and currently has 640 locations as of 2016. BCBG: BCBG Max Azria Group filed for bankruptcy protection in March. The company is closing about 120 stores, mostly in the U.S., CNBC reported. Liquidation sales started in February and will run eight to 10 weeks before the stores close for good. Bebe Stores Inc.: The specialty women's apparel chain will close 21 of its 172 locations, some 12 percent of its outlets, according to CNBC. Casual Adventure: The outdoor equipment outfitter in Arlington, Virginia is closing its doors after 61 years of business. The family-owned store has been operated by four generations but can't stay open any longer due to online competition and growing demand for the property.Children's Place: The children's clothing company plans to close up to 300 stores through 2020 to focus

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John 2 months, 1 week ago

on online shopping and began the downsizing process in 2015, CNBC reported. However, a surge in profit during the first quarter of the fiscal 2017 year looks encouraging. Children's Place: The children's clothing company plans to close up to 300 stores through 2020 to focus on online shopping and began the downsizing process in 2015, CNBC reported. However, a surge in profit during the first quarter of the fiscal 2017 year looks encouraging. Crocs: The plastic clog company will close 160 of its 558 stores by the end of 2018, according to Forbes. GameStop: The new and used video game retailer announced in March that it would be closing 2 to 3 percent of its global store footprint, which could mean as many as 190 stores, CNBC reported. GameStop currently has more than 6,600 stores globally, with 4,400 in the U.S. HHGregg: The electronics retailer giant is going out of business after more than 60 years. The company announced in March it plans to begin closing 88 of its 132 stores and three distribution centers. Liquidation sales are currently underway and should be complete by mid-April. J.C. Penney: The nearly 115-year-old department store announced in February that it will close 130 to 140 stores and two distribution centers over the next several months, but reversed course Thursday, announcing that it has postponed liquidation sales and closures of those stores. "The liquidation will now begin May 22 instead of April 17 as originally scheduled," according to CNBC. The new closure date, July 31, is about six weeks later than originally planned, CNBC reported. J.C. Penney currently has 1,014 locations.

Source: LIST: Here Are the Retail Stores Taking Hits, Closing Hundreds of Locations - NBC4 Washington http://www.nbcwashington.com/entertainment/the-scene/Retail-Stores-Taking-Hits-Hundreds-of-Locations-Close-419089074.html#ixzz4ue9hJ8XA Follow us: @nbcwashington on Twitter | NBCWashington on Facebook

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Well_mudda_take_sic 2 months, 1 week ago

Capt. Butler does make one very good point. The yapping little white-haired poodle (D'Aguilar) has said absolutely nothing about what he intends to do to address the very bloated headcount and related excessive payroll costs at Bahamasair. For that we probably need an aggressively loud snarling and menacing looking pit bull rather than the yapping little white-haired poodle!

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sheeprunner12 2 months, 1 week ago

Be patient ........... Bahamasair took 40 years to mess up ..... 4 months cannot solve that yet

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Economist 2 months, 1 week ago

It will be at its normal $30 million loss. Sell the aircraft and shut the airline down. We don't need it.

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DDK 2 months, 1 week ago

Not a great fan of CAPTAIN Butler but he speak da trut about da rates! Da Minister also right!

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killemwitdakno 2 months, 1 week ago

Future of WTO. Wait til foreign companies sue over subsidies.

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baldbeardedbahamian 2 months, 1 week ago

Close it down. Save the taxpayers pension money to pay pensions.

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sealice 2 months, 1 week ago

Mr D’Aguilar said the national flag carrier employed 690 persons to handle just eight aircraft, a ratio of 86.25 workers per plane. And staffing costs eat up 42 per cent of its revenue, a ratio almost twice the industry’s 20-25 per cent average.

If that ain't the WONDER BRA of support for our National Carrier IDK what is.....

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dwayneturnquest 2 months, 1 week ago

What they should do over the next 3 years is shutting down operations and allow sky to grow. whomever is rounding that pentionable period let them go home early and whoever sky decides to absorb into their operation they do so. I am sure if Bahamas Air were to dissolve Mr. Butler would be able to grow his business and put the airline business back in the hands of the private sector.

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baldbeardedbahamian 2 months ago

Bahamasair is so dysfunctional that it never be sold. Thank you Peter Bethel, member of the corrupt and inept pindling administration, for taking H.G. Christie's innovative and successful creationand turning into the shambles it is now. Peter bethel was paid a large government pension for years after being voted out of office. Abolish the pension scheme for all MPs, they do not deserve them. If Shane Gibson is tried and convicted and sentenced to jail time, he will still be getting a large pension check every month when he reaches retirement age. Does this seem right? Abolish this evil system of giving large pensions to fired MP's. Most especially PM's.

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