The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nassau Flight Services (NFS) must “reduce its ever-increasing draw” on Bahamian taxpayers, a Cabinet minister charged yesterday, after privatisation efforts proved unsuccessful.

Dionisio D’Aguilar, minister of tourism and aviation, told Tribune Business that the ground handling services provider’s board were “anxious” to explore “some very interesting prospects” for expanding revenue streams now that it will remain in government ownership for foreseeable future.

Placing the focus on top-line growth rather than cutting costs, Mr D’Aguilar pledged that there will be “no downsizing” of Nassau Flight Services’ 244-strong workforce even though he effectively conceded that over-staffing and a generous industrial agreement were undermining the company’s financial viability.

He added that there were “automatic” increases in salaries and benefits “every year irrespective of how well the business performs”, and said the government was determined to restructure and realign Nassau Flight Services “so that it makes sense”.

Mr D’Aguilar blamed the former Christie administration and his ministerial predecessor, Glenys Hanna Martin, for the ground handler’s present financial condition on the basis that it first became a burden on Bahamian taxpayers during their term in office.

Given this background, it is unclear why the government decided not to follow through with privatising Nassau Flight Services given that such a move would have seemed obvious commercial sense.

Mr D’Aguilar declined to detail the reasons for the Minnis Cabinet’s decision not to proceed when questioned by Tribune Business yesterday, merely saying: “The Government decided ultimately that it didn’t wish to sell. No other reason than that. They felt that after all things were considered it was better to keep it under public state ownership.”

However, this newspaper received further confirmation yesterday that the Government’s decision was based on political rather than commercial considerations. Tribune Business reported on Thursday that the Minnis administration had backed off for fear that any buyer would likely need to significantly cut Nassau Flight Services workforce given previous revelations its wage bill was equivalent to 99 percent of revenue.

Job losses, several sources suggested, would not be the Government’s desired outcome as it starts to gear up for a general election in which it will likely need every vote possible. “I don’t think it had anything to do with the quality of the bids, and was more to do with the political consequences,” one source said.

“The Cabinet turned it down and agreed to keep it with the Government for the time being, so nobody is going to win anything. I think the reasons were that politically it did not make sense to lay-off lots of people at this time, and they agreed to defer it.”

Mr D’Aguilar declined to comment on this, but denied that the decision to end the privatisation process and not accept either of the two final bids represented a setback for the Minnis administration’s twin goals of expanding Bahamian entrepreneurship/creating wealth and getting the Government “out of business”.

“I think the Government is strategically looking at each one of its assets, and each one of the services it’s delivering, and evaluating in each instance which is the best outcome,” he told Tribune Business.

“In the first instance it’s to reduce the draw on the public purse and, in the second, to improve the quality of service that asset delivers. They’re looking to see which one of these vehicles is in the best interests of the Bahamian people, whether it’s an outright sale, a public-private partnership (PPP) or retaining the asset under state ownership.”

While the Nassau Flight Services process had explored an outright sale or privatisation, Mr D’Aguilar explained that the model selected for the Nassau Cruise Port’s $250m transformation was a PPP-type structure with Global Ports Holding.

He reiterated that the Government looked at all its state-owned enterprises (SOEs) on a case-by-case, independent basis, with outsourcing, privatisation and PPP models particularly favoured if they were likely to produce “significant growth in employment opportunities”.

Outlining the Government’s strategy for Nassau Flight Services now that it is set to remain under state ownership, Mr D’Aguilar told Tribune Business: “The objective is to make it more self-sustaining, and to diminish its ever-increasing draw on the public purse.

“The last time the FNM was in office, this entity drew nothing on the public purse, but after five years under Glenys Hanna Martin it’s not a draw on the public purse. We have to now increase revenues and stop the automatic increase in all the costs.

“A lot of this is the labour component. There’s automatic increases every year irrespective of how well the business is doing,” Mr D’Aguilar continued. “We’re trying to realign it so it makes more sense. It doesn’t make sense, and I don’t think the taxpayer is wiling to cover an ever-increasing drain on the public purse.

“We’ve got to see how best to make it viable, and the best way to do it is grow the business. That’s what they’re aiming for and trying to do. There’s going to be no downsizing of the workforce, but there are some very interesting prospects out there that chairman Ricky Mackey and his Board are anxious to bring focus to, and make the company more profitable and less loss-making.”

Mr D’Aguilar declined to specify these “very interesting prospects”, referring the question to Mr Mackey. Nassau Flight Services is due to receive a $1.8m subsidy for the 2019-2020 fiscal year, with this sum set to increase to $2m in 2020-2021 and to $2.05m in the subsequent two fiscal years, thereby keeping it firmly on the taxpayer’s payroll.

The privatisation tender document also laid out relatively modest growth prospects for a business whose annual top-line stands at around $8m. Revenues from Nassau Flight Services’ main ground handling business were projected to grow at 2 percent per annum over the next decade, increasing from an actual $6.251m in 2018 to $7.62m in 2028.

“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 added. “NFS has managed an average of 6,600 flights during the period 2015-2018.”

The number of flights handled by Nassau Flight Services was 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 - which matches the level of revenue growth.

A downsizing of Nassau Flight Services’ 244-strong workforce, featuring 166 full-time workers and 78 temporary staff, was almost inevitable post-privatisation given the need to better align costs with income. This, though, would not have been easy given the presence of trade unions via the Airline, Airport and Allied Workers Union and an existing industrial agreement.

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.