By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The government’s latest privatisation target is forecasting annual revenue growth of just two percent over the next decade, with the selection of a preferred bidder targeted for end-July 2019.
The Nassau Flight Services (NFS) prospectus, a copy of which has been seen by Tribune Business, reveals that the Minnis administration is targeting a tight two-month window in which to choose a winning purchaser/franchise operator for the airport ground handling services provider.
According to the timeline set out in the bid documents, potential bidders are supposed to submit all outstanding questions on Nassau Flight Services, its operations, finances and the process to the government by today.
The latter is to provide all necessary answers by June 17, and all bids are due to be submitted by June 28. Interviews with the best offers will be held “if necessary” on July 12, with the preferred bidder selected one week later and the “purchase/franchise agreement” awarded by July 26, 2019.
Setting out a breathless pace that some observers will likely believe is unrealistic, the Nassau Flight Services request for proposal (RFP) allows only one week between the award and contract execution on August 2, 2019. A 30-day transition to the new owner/franchise operator will then begin on September 2, 2019, with the takeover closing on October 2, 2019, in a process lasting less than five months.
Information attached to the bid documents reveals that Nassau Flight Services is projected to enjoy somewhat modest growth in its main business line, ground handling, over the next decade to 2028.
Top-line revenue from this source is forecast to rise by 21.9 percent over this period, increasing from an actual $6.251m in 2018 to $7.62m in 2028 - a relatively modest pace of growth that, in total, is less than $1.5m.
Any purchaser will seek to increase this, and generate faster revenue growth rates, to earn the desired return on investment (RoI) that will be set out in their business plan. “NFS has managed an average of 6,600 flights during the period 2015-2018, and is projecting a two percent annual growth over the next ten years,” the bid documents confirm. “NFS has managed an average of 6,600 flights during the period 2015-2018.”
The number of flights handled by Nassau Flight Services is also forecast to increase from the 6,850 handled in 2018 to 8,350 by 2028 - an increase of 1,500 annually, or 21.9 percent, that matches the level of revenue growth.
Nassau Flight Services’ financial statements were not attached to the RFP seen by Tribune Business, but there is every indication that the company continues to be a loss-maker - albeit a modest one in comparison to other state-owned enterprises (SOEs). It is in line to receive a $1.8m subsidy in the 2019-2020 budget, the same as this year, with increases to $2m and $2.05m in the next two fiscal years.
The ground handler currently has 244 total employees split between 166 full-time workers and 78 temporary staff, who provide services at Lynden Pindling International Airport (LPIA), Exuma and San Salvador airports.
The fate of the staff, and the industrial deal with the Airport, Airline and Allied Workers Union (AAAWU) that any buyer will inherit, are likely to be key subjects in negotiations between the Government and preferred bidder.
The union deal is valid until February 2020, and the Government’s RFP says it will accept either an acquisition of “minimum 10-year franchise agreement” from the winning bidder. “Either agreement will include minimum staffing, operational and service standards for Nassau Flight Services, and the operator will be required to consistently offer service that compliments the service level required by the respective airport operator,” it added.
Nassau Flight Services’ client base comprises British Airways, Air Canada, West Jet, Sunwing Airlines, InterCaribbean Airlines, Caribbean Airlines, COPA Airlines and Cubana Airlines at LPIA’s international terminal, and Jet Blue, Southwest Airlines, United Airlines and Silver Airlines at the US terminal.
It also serves a host of charter and other operators, including Air France and Condor, while in Exuma it serves Air Canada and takes care of American Airlines and Air Cariabes in San Salvador.
Baha Mar’s full opening, and the airlift expansion generated by other tourism-related projects and associated visitor demand, will create opportunities for a privatised Nassau Flight Services to grow its market share and revenue opportunities.
Total passenger traffic transiting LPIA totalled 3.693m in 2018, and the RFP said: “In 2018 LPIA handled more than 146,000 aircraft take-offs and landings.
“LPIA primarily serves the tourist market, with around 67 percent of its traffic originating in, or destined for, North America. Other international destinations, including the UK and the Caribbean, account for approximately 11 percent while a further 22 percent serve the Bahamian Family Islands.
“Currently, 21 commercial air carriers provide scheduled and charter service to 55 domestic, transborder and international destinations.”
Dionisio D’Aguilar, minister of tourism and aviation, identified Nassau Flight Services as a prime privatisation candidate during his contribution to the 2017-2018 Budget debate, especially given that the business is of a size that puts it within range of the financial capabilities Bahamian investor groups and companies.
He has repeatedly said only Bahamians need apply, adding: “It’s important to note this company has revenues of $8m. It’s not a significantly large company, and we think it’s ideal for the type of entity that the Government should put into the hands of the entrepreneurial class.”
It is unclear, though, why the Government decided to effectively bind the hands of potential investors/acquirers through Nassau Flight Services’ signing of a new industrial agreement with the representative for its line staff, the Airport, Airline and Allied Workers’ Union (AAAWU), in December 2018.
Mr D’Aguilar told Tribune Business earlier this year that Nassau Flight Services’ payroll costs alone now equal 99 percent of revenues, making it a virtual certainty that any buyer will have to right-size the workforce via a voluntary separation plan (VSEP) and allocate additional capital to cover such an expense.
Comments
Well_mudda_take_sic 4 years, 9 months ago
D'Aguilar and Minnis have no interest whatsoever in privatising NFS; airlift is just too critically important to our country, even if the ground support for it is about as bad as it can get. Their only interest is to give NFS to a FNM crony strawman owner who will sever all existing PLP employees with government (taxpayer) support and then hire umpteen supporters of the FNM with ongoing government (taxpayer) support. Every government has been doing this for the past two decades or more, leaving taxpayers strapped with the ever growing subsidies to NFS. Meanwhile the foreign airline carriers are fed up with the shoddy service they receive from NFS. What a joke!
birdiestrachan 4 years, 9 months ago
doc and Mr D"Aguilar all ready know who will buy the Company, the same as they always knew the post office will be in the Town Mall. Brent Symonette building that he could not sell.
They are only going through the motions to fool the peoples time voters,
bogart 4 years, 9 months ago
Hmmmmmmmm.......if da Gubbermint has the capabilities to shed staff an reorganize company to make profits......then why sell it to ......someone..a company to do da same thing to make profits....??????
bogart 4 years, 9 months ago
Hmmmmmmm.....seems deja vu in da making.....agreement sale Lucayan Hotel .....same procedures sticking it to pore struggling taxpayers.....paying severencing paychecks to staff and managers......staff entitlements....paying off pensions .....paying whole stamp duty......settling outstanding bills.....sticking it more to pore taxpayers......one in seven Bahamians hungry.....
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