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Bahamasair's cash burn at $7m on 'deeper dive'

Tourism Minister Dionisio D’Aguilar.

Tourism Minister Dionisio D’Aguilar.

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A "deeper dive" has revealed Bahamasair is burning through $7m per month in what one Cabinet minister yesterday described as a "vexing" problem for taxpayers and the Public Treasury.

Dionisio D'Aguilar, minister of tourism and aviation, told Tribune Business that previous estimates suggesting the national flag carrier's total COVID-19 shutdown was costing $3.5m per month had under-estimated the magnitude of the problem by 50 percent.

That sum, he explained, consisted largely of staff payroll and benefits, and ignored other costs such as the airport fees, leases and rents that Bahamasair pays at all international airports it flies to, plus insurance and debt servicing payments associated with the $120m loan that helped reequip its fleet.

"Bahamasair is totally shut down right now. It probably has about $7m a month in fixed costs by the time you factor in payroll and benefits, airport leases and other insurance, and all those other fixed costs. That's what it's clipping up at," Mr D'Aguilar told Tribune Business.

Both Tommy Turnquest, Bahamasair's chairman, and Tracy Cooper, the airline's managing director, have previously said the first COVID-19 three-month lockdown cost the national flag carrier some $10.5m or $3.5m per month.

Challenged to explain the discrepancy, Mr D'Aguilar replied: "That [$3.5m] was for payroll. We've done a deeper dive. We've got that payroll, the $120m loan that was taken out for the five ATR aircraft, which is about $100m now as we've paid-off some of it.

"You've got the airport rent wherever Bahamasair flies, whether it's West Palm Beach; Fort Lauderdale; Miami; NAD; Orlando; Grand Bahama; Turks & Caicos; Haiti. You're in about $84m, or $7m per month, in fixed costs."

The minister added that the airline's staffing costs, inclusive of salaries, pensions, benefits and health insurance, accounted for just under 50 percent of the total by coming in at between $35.$40m per year.

Bahamasair's plight, he added, mirrored that of all government-owned entities in the Bahamian aviation industry. Mr D'Aguilar noted that both the Airport Authority and Nassau Flight Services (NFS), as well as the Nassau Airport Development Company (NAD), had seen their fee-based income sources evaporate as a result of the tourism shutdown and border closures related to COVID-19.

The minister conceded that NAD's ability to service the nine-figure debt taken on to finance Lynden Pindling International Airport (LPIA) $409.5m redevelopment will be threatened if the COVID-19 pandemic and travel shutdown persist for many more months.

With the airport operator's fee and rental income having dried up, Mr D'Aguilar said: "You have to scale back all your operations, all your discretionary spending and all your capital expenditure to meet the obligations to the debt holders.

"You have the cash you have, but that will only take you so far. There will probably come a time to turn to your bond holders and ask for concessions; whatever you can get. You have to turn to your bond holders, at some stage when the opportunity presents itself, and ask for concessions.

"You have to really throttle back all of your expenses in order to push that discussion as far down the road as possible and hope things begin to turn prior to that."

Mr D'Aguilar told Tribune Business that the Government will now "have to pivot quickly" to focus on saving jobs, businesses and the economy as well as deal with COVID-19's health implications after the Inter-American Development Bank (IDB) estimated that the pandemic could threaten up to 100,000 Bahamian jobs.

With an IDB study forecasting more than one in six "formal" Bahamian jobs might be lost, the minister said: "The pandemic is devastating. It's just devastating in so many ways. It's very sad that it's so devastating. I think we probably have to pivot quite quickly to really focus on saving livelihoods.

"I think that's going to be a major concern for all of us. COVID-19 is here for a while. I think everybody understands it's here for at least another year, as much as want to be optimistic about the availability of a vaccine we have to start recognising this is a new normal, and we're going to have to start living with COVID-19 in some way, shape or form for the next 12 months at a minimum. It's real challenge."

Mr D'Aguilar said more than 1,000 jobs relied upon Bahamasair, Nassau Flight Services and the Airport Authority, all of which have seen their fee and user-based income shrivel with the global travel and tourism shutdown.

"Bahamasair is probably the biggest of the bunch because it has the biggest fixed costs with the aircraft and a substantial payroll," he added. "All of those agencies are significantly impacted by the fact they have no users paying fees.

"If your regard is to maintain the employee levels, that becomes a burden. Now they don't have the user fees, they will revert back to the shareholder for payroll costs. It's vexing me and vexing the Treasury, the minister of finance, because usually those agencies rely on government for a subvention but not nearly as substantial as that which is coming due.

"We're fighting as hard as we can to maintain salaries and wages to as many people as we can for as long as we can...... The minister of finance [K Peter Turnquest] is probably getting this challenge all around from many government entities that relied on user fees," Mr D'Aguilar continued.

"It's a systemic problem. All those government agencies that survive on user fees, when they're dislocated because people cannot pay or are not using the service any more, the cost structure in many of those entities is at a high level of fixed costs, and when you don't get many customers your losses career out of control. They explode."

Mr Turnquest, Bahamasair's chairman, previously warned that the airline will close down unless it receives a substantial increase upon the $19m subsidy allocated in the 2020-2021 budget due to its mounting losses.

Comments

thps 2 years, 3 months ago

So we have a Chairman Minister Director and entire Company who doesn't know that the cost to run a business is not just its payroll?

Are we surprised anymore?

Doesn't he like to tell us he is an accountant?

You really can't make this up.

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Porcupine 2 years, 3 months ago

Thinking the same. The deeper dive should be done before opening your mouth. High school work expecting first world salary. Our bar is set inexcusably low.

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Clamshell 2 years, 3 months ago

Hey, Neil, your math is wrong, dummy. If they thought it was $3.5 million a month and it was really $7 million, they were off by 100%, not 50%. Wow ... an accountant and a business editor involved in this story, and neither can do 8th grade math.

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thps 2 years, 3 months ago

Or how our new cases were down 40%. Maybe Doc locked us down to find the 40% decrease in weekly new cases and the other 50% a month underestimate.

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Honestman 2 years, 3 months ago

Clamshell you are no Maths genius. If the actual cost is $7m per month then the under-estimate is 50% since 50% of $7m is $3.5m.

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Clamshell 2 years, 3 months ago

No ... it was presented the other way: The loss projection was $3.5 million, the actual loss is $7 million — when a number is doubled, it is increased by 100%. The writer said it was undeestimated by 50%, which is wrong, as the base number is $3.5 million, not $7 million.

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moncurcool 2 years, 3 months ago

So they underestimated by 50% not 100%. 7 million makes 100%.

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Clamshell 2 years, 3 months ago

If they had underestimated $3.5 million by 50%, they would have been off by $1.75 million, which is 50% of $3.5 million, and the total loss would have been $5.25 million. Man, there’s a few people here whom I would LOVE to meet across a poker table. 🤣😎

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Clamshell 2 years, 3 months ago

Try it again: The loss estimate was $3.5 million. The actual loss was $7 million, or double. When you double a number, you increase it by 100%. Thus, the projection was off by 100%. Clear?

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Honestman 2 years, 3 months ago

Clamshell,

Actual = 7. Estimate =3.5

Therefore there is a 50% under estimate or you can say the actual was 100% higher than the estimate.

Both statements are correct.

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Clamshell 2 years, 3 months ago

Multiply the projection, $3.5M, by 50% and let me know if the result is $7M. 😎

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tribanon 2 years, 3 months ago

@Clamshell: You're absolutely right - Hartnell got it wrong. The previous estimate of $3.5 million was under-estimated by 100%. Hartnell likely meant to say the previous estimate of $3.5 million is only 50% of the current estimate of $7 million. Hartnell erred in either his maths or his words - only he knows what he intended to say. But the maths must fit the context within which it was used and Hartnell knows full well he failed to make that happen.

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tribanon 2 years, 3 months ago

These two buffoons, D'Aguilar and Tommy T, should have long ago taken steps to reduce Bahamasair's gushing cash bleed out to the maximum extent possible, as was sensibly done by just about every other passenger airline company around the world. But not surprisingly, D'Aguilar and Tommy T seem incapable of quickly finding the tap heads or valves they need to shut-off in order to stop as much of the cash bleeding as possible. They prefer whining about the problem to us through the news media, instead of actually doing something about it. Just how much more of this utter incompetence is our nation going to made to endure?!

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tribanon 2 years, 3 months ago

P.S. After immediately shutting-off the spending taps, proceed to close the airline for good by appointing a competent liquidator who does not charge an outrageous hourly fee rate for his or her services.

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Economist 2 years, 3 months ago

That's the best suggestion yet.

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bogart 2 years, 3 months ago

The Govt is not devoid of expertise in Bahamasair apart of above mentioned. The Govt Cabinet consists quite notable expertise in the DPM. The now DPM previous Opposition Member of Parliament peoples representative was the "Shadow Minister of Finance" in Govt while the other was in power last 5 yea rs vigorously debating all spendings etc. The present DPM also has vast Business experience as a top leader as the Head of the Grand Bahama Chamber of Commerce, and has vast experience as a Certified Account etc.

The DPM is no stranger to the Airline Industry as a revealed in past budget articles etc comments as past budget as part ( in the past Budget was the Duty Free on planes and helicopters) of airline SkyBahamas not benefitting.

Expertise as 'Shadow Finance Minister' representing peoples interests, Chartered Accountant, past or present owner of an Airline,past leader of the Grand Bahama Chamber of Commerce. current Finance Minister of the nations interest. The nation has no shortage in decision making on Bahamasair immediately. Further, should be mindful of effects of disease on travel market revenues to which seems not or obvious to be abounding in full force capacty and some campaining US leaders emphasis on shutdowns for disease control which affects Bahamas.

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trueBahamian 2 years, 3 months ago

Sounds like no one in management at Bahamasair nor the Minister knows anything about running an airline or business for that matter. Mr. D'Aguilar being a businessman should know something about business. It's like Super Value shutting down because of a lockdown and Mr. Robert's looking at salary but forgetting he has rent (if he doesn't own the buliding), electricity to keep his frozen goods from spoiling, etc.

Can everyone in Bahamasair along with the Minister just resign? Bahamasair is just a waste of taxpayer money in good times, judge now. Can the government just shut this down as it is only an expense that we can afford to keep paying?

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Baha10 2 years, 3 months ago

This is most embarrassing ... particularly for anyone who holds themselves out as a Businessman ... just run it like any other business without emotion ... which dictates you close it ... and the Pandemic is the perfect time to do just that NOW ... as if it could not make money in “good” times, it is certainly not going to do any better over the course of the next 5 years!

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Amused 2 years, 3 months ago

Every airline worldwide retiring older aircraft and laying off staff to survive, not bahamasair let's keep everyone and just overburden a already exhausted taxpayer. Airline either needs to shut down or be privatized

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rawbahamian 2 years, 3 months ago

Paying out salaries and benefits !!! That flying circus of union bozos need to be flat out sold to the unions who think they own it and let's see how they manage with all of their stupid demands while keeping the airline running because they NEVER EVER push for productivity, their only interest is more money and selling it to them will give them the opportunity to make as much money as they think they deserve !!!

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Baha10 2 years, 3 months ago

I wonder if “Super Wash” had been and continuing to lose money for years if D’Aguilar would continue to invest what now is not even his own money anymore (as that’s long gone) but borrowed money (as that is all we have) with NO HOPE of “ever” recouping?!?

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ThisIsOurs 2 years, 3 months ago

"I think we probably have to pivot quite quickly to really focus on saving livelihoods."

It's much too late for pivoting "quickly". They allowed the economy to drag for months. Submitted ideas and suggestions have no guarantee that they would work. But if the recovery committee has no ideas and suggestions in 6 months that's a 200% chance of nothing working.

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bcitizen 2 years, 3 months ago

Oh what it must be like to take other peoples money and give it to other people to sit home and not work. Private citizens who drive the economy, who have no job, no income, have to pay with what they do not have to the mostly useless public service and corporations who are sitting home collecting a paycheck with no fear of getting laid off for votes next election. The worst part is when the economy does try to get back up and running Mr. Civil servant will be there with his hand out and their useless forms & paperwork all while saying no, blocking, harassing, over regulating, and trying their damndest to stop the private people from getting the economy going.

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