By NEIL HARTNELL
Tribune Business Editor
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.