Mr. Roberts seconded the resolution for the government to guarantee repayment of a $7.2 million loan for the purchase of two Dash 8 planes.
An independent Member of Parliament, meanwhile, raised concerns regarding the viability of two of the airline’s jets already in operation.
But the resolution to guarantee the loan repayment is unconnected to the jets in question.
Bahamasair’s loan agreement with Scotiabank provides for repayment of the principal amount over seven years. Mr. Roberts said purchasing the planes would increase the airline’s reliability record, making it more attractive to be purchased.
“As we move down the checklist of our initiatives, it brings us closer to privatization,” he said. “Once we raise the service quality and reliability level at Bahamasair, we will be in a much better position to negotiate an equitable price for the airline. With sound planning it is expected that we will get there within 12 to 18 months.”
According to Mr. Roberts, the addition of the two 11-year-old aircraft bought from Bombardier Capital Incorporated in Vermont, would contribute $4 million annually to Bahamasair, beginning next year.
“This is just one of the many initiatives the new board of Bahamasair has put forward to improve the overall performance of Bahamasair…management has been seeking to expand Bahamasair’s fleet of aircraft for some time and after thorough research these two aircraft were selected,” Mr. Roberts said. “It is expected that by Bahamasair improving its reliability, it will attract the customers it lost through being unreliable.”
Minister Roberts revealed that there were 895,000 passengers who traveled aboard Bahamasair between July 1, 2002 and June 30, 2003, which represented a decline of some 93,000 passengers compared to the same period over the previous year.
The two aircraft will bring to nine the number of planes in Bahamasair’s fleet. Mr. Roberts said that once they were selected, Bahamasair contracted Lufthansa, in addition to its own technical staff to conduct technical competency analysis to ensure value for money.
“Both technical competency reports were positive and spoke very highly of the condition of these aircraft,” Mr. Roberts said.
Minister Roberts said Bahamasair got an “excellent deal” on the aircraft. The aircraft were valued at $3,720,000 each. However, they were negotiated down to $3,625,000 per aircraft.
“After Bahamasair’s board concluded its negotiations with the seller, I was able as minister, to negotiate a further reduction with the seller agreeing to provide an additional $50,000 in spare parts at no additional cost to the national flag carrier,” Minister Roberts said.
“These aircraft come equipped with leather interior, fuel efficient turbine engines, low noise emission, cockpit flight management systems and HF radio. There are 400 of this type aircraft in service all around the world which should make spare parts and serviceability a non-issue,” he added.
During his communication, Minister Roberts announced that external auditors have recently completed their review of the company’s financial statements for the year ending June 30, 2003 with the total revenue being $63.8 million. This, he noted, reflects a decline of over $3 million compared to 2002. The total expenses for the same period was $86.6 million compared with $89.2 million the previous year. The estimated financial loss for the year ended June 30 was $25.5 million, compared to the $26.5 during the same period in 2002.
“This is not very encouraging news,” Minister Roberts said. “However, I am advised that all significant indications currently point to a meaningful reduction in the level of losses for the fiscal year ending 30th June, 2004 as a result of the acquisition of these two new aircraft,” Minister Roberts said.
Meantime, Acting Minister of Finance Alfred Sears said since 1998, Bahamasair has received $94.6 million in direct government support. He said this level of support is substantial and no longer sustainable.
Minister Sears pointed to the International Monetary Fund’s recent caution to the government to reduce its level of support to state agencies, namely Bahamasair if the government is to achieve its goal of fiscal balance.
“The fact that The Bahamas is a participant in the international capital market and is subject to external scrutiny from two rating agencies, Moody’s and Standard & Poor’s, means that the reduction in the level of financial support to loss making agencies has to be achieved quickly,” Minister Sears said.
Minister Roberts indicated earlier this year that in the financial statements for the year ending June 30, 2002, there was an issue with the auditors regarding the complete write-off of two jet aircraft.
The value that Bahamasair had on its book for the aircraft at the time was $6.4 million. However, the best offer the airline received, according to Minister Roberts, was $600,000 each for a total of $1.2 million.
When questioned by Bamboo Town MP Tennyson Wells as to the reliability of such low priced planes, Minister Roberts pointed out that there is no connection between the cost of an aircraft and its viability to fly.
“I don’t care how old the aircraft is, what it looks like, it doesn’t matter even if it has gold plated seats, it cannot fly unless it complies with the regulations,” Minister Roberts said.
He noted that Bahamasair has complied with the flight standards in place for all of its aircraft. However, Mr. Wells was still not convinced of their reliability.
“Just to keep those standards of the Civil Aviation Authority in place costs $600,000 on an annual basis, so they must be a hazard to the public to fly them,” Mr. Wells said.
“It’s very serious and I don’t think you should come to the House and tell the Bahamian public that we have those two jets on the books at $600,000 and [we’re] flying the public in them? Something has to be wrong with that,” he insisted. “Either the people are giving wrong information on the value or something is seriously wrong with those aircraft… if the pilots of Bahamasair know that those aircraft are worth $600,000, they wouldn’t fly them.”
Rebutting this argument in an attempt to clarify the matter, Minister Roberts reiterated that the aircraft’s cost and viability are not connected.
On a point of order, former Prime Minister and MP for North Abaco Hubert Ingraham asked Minister Roberts whether an entity which offers consultancy to the world’s leading airlines valued the aircraft in excess of $5 million. However. when Bahamasair was offered a purchase, it was in the range of $650,000.
Minister Roberts explained, “First of all Bahamasair went out to find out from the market if there was anyone interested in purchasing the aircraft because consideration was being carried out to possibly acquire or lease three Boeing 737s and the valuation response was that there was one company interested and the best offer they made was $600,000 each. The valuation at the time I’m advised, was somewhere in the vicinity of $4 million for both.”
Turning his attention again to Mr. Wells, he lauded Bahamasair’s safety record over the past 30 years, adding that its pilots would not fly an aircraft that does not comply with international civil aviation regulations.
“So I am surprised that the member for Bamboo Town would even infer, dream or suggest that could happen,” Minister Roberts said angrily.
“I would fly Bahamasair anywhere. The ones with the big money and the flashy new aircraft can’t boast of such a thing, Mr. Speaker. Just look back at their aircraft. I don’t think that one life should be extinguished to save $20 million. Life is more valuable than money,” he added.
By Hadassah Hall, The Bahama Journal
