The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister has told foreigners to forget about bidding for Nassau Flight Services (NFS) with his ministry today launching the privatisation process for the state-owned ground handler.

Dionisio D’Aguilar, minister of tourism and aviation, told Tribune Business that the company’s $8m annual top-line meant it was of “ideal” size to be acquired by Bahamian companies or investor groups as part of the Government’s drive to create a local “entrepreneurial class”.

He reiterated, though, that Nassau Flight Services would not simply be given away by the Government. Mr D’Aguilar said the winning bidder would need to show a credible business plan, together with past expertise, track record and necessary skill set, to convince the Minnis administration they could “ensure the company’s success post-privatisation”.

The Ministry of Tourism, in a statement issued yesterday, revealed that the Government will consider a franchise (operating) agreement for Nassau Flight Services as well as its outright sale when the official Request for Proposal (RFP) is issued today.

Tribune Business, which spoke to Mr D’Aguilar on Friday after learning that the RFP’s release was imminent, was told by the minister that it would be issued “in the next 30 days if not sooner” with the Government vetting the final details.

“This is not something owned by the Bahamas government that we’d like to be in the hands of non-Bahamians,” Mr D’Aguilar said. “It will definitely be in the hands of Bahamians if a deal is done. Absolutely.

“It’s part of the Government’s mandate to put these businesses into the hands of Bahamian entrepreneurs and businessmen of mid-size under the belief it should help to nurture and grow a vibrant entrepreneurial class.

“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.”

Emphasising that there would be no give away, Mr D’Aguilar added: “We want to ensure there is success, so we’re going to pick someone who demonstrates success in business, and has some knowledge about business and some experience and background in business to ensure it’s a success once its privatised.

“We’ll see who’s interested. Hopefully there’s significant interest, which makes the selection process that much harder, but that comes with the territory... Ultimately the decision rests with the Cabinet as to what to do, and what to accept based on what’s received. Let’s see where this journey takes us.”

Mr D’Aguilar 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.

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.

The Ministry of Tourism statement yesterday went to great lengths to reassure Nassau Flight Services staff, saying: “The Government certainly understands the anxiety that exists among the employees, and the objective is to ensure not only compensation as per existing industrial agreements or the Employment Act but re-engagement where possible through careful and deliberate negotiation with the successful proposer.”

All of which indicates that labour-related issues will be central in negotiations between a preferred purchaser and the Government to secure a deal. Mr D’Aguilar also indicated as much, saying: “Any time you contemplate the sale of government-owned assets there’s a pretty detailed and involved process.

“You have to go through a heavy consultation and informational period to let everybody know - Board, management and staff - and alerting them. We’ve talked about the process. It’s fairly straightforward. You have to inform people of what’s coming, and be very open and transparent so they know what’s going on.”

Nassau Flight Services is already running at a significant loss, as indicated by an annual taxpayer subsidy of around $2m. This has been trimmed to $1.8m for this year’s budget and 2019-2020, but is projected to rise back to $2m in 2020-2021. 

The proposed Nassau Flight Services privatisation is thus part of the Government’s wider efforts to reduce the multi-million dollar taxpayer subsidies that prop up loss-making state-owned enterprises (SOEs).

The Ministry of Tourism, in confirming that both acquisition and franchise proposals will be considered, said Nassau Flight Services currently provides airport ground handling, passenger operations and other support services at Lynden Pindling International Airport’s (LPIA) international pre-clearance and international terminals, San Salvador Airport and Exuma International Airport.

The company, acquired by Aircraft Services International, a US ground handling company, in the 1970s was then purchased by the Bahamian government in 1979.

“The exploration of the sale of Nassau Flight Services will include a review of the offers received to determine if a recommendation will be made to the Cabinet for the sale or franchise agreement of the business,” the Ministry of Tourism added.

“The intent is to create Bahamian entrepreneurs and, given the company’s size, it is well within the reach of medium-size prospective Bahamian buyers. Therefore, the privatisation by direct sale or franchise arrangement is an integral part of the wealth creation and distribution of state-owned assets to qualified Bahamian companies while also delivering better value for money for all stakeholders.”

The RFP will be available via the Government’s procurement portal or through the e-mail address published in both newspapers.