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Cabinet yet to receive report on CAL ‘freebies’
No report was submitted to Cabinet yesterday on the 19 airline tickets received by Caribbean Airlines Ltd (CAL) vice-chairman Mohan Jaikaran for Mother’s Day concerts held in New York and Toronto last week. Cabinet sources yesterday told T&T Guardian that the report may be submitted next week when the matter is expected to be discussed. Finance Minister Larry Howai had requested a report from CAL chairman Rabindra Moonan on the matter after a T&T Guardian exclusive report on May 8. The report was submitted earlier this week, but Howai requested additional information to determine whether Jaikaran was part of the decision-making process for the complimentary tickets he received.
Reliable sources told T&T Guardian that acting CEO Robert Corbie objected to the number of airline tickets requested but was pressured to approve the request. Both Corbie and Jaikran were absent from Tuesday’s board meeting as they were dealing with personal matters. Sources said Corbie, who took seven days’ leave last week, requested an extension and is not expected back until next Wednesday. Minister in the Ministry of Finance Vasant Bharath, Howai and Moonan could not be contacted for comment yesterday. Meanwhile, T&T Guardian learned the CAL/Air Jamaica agreement is also expected to be raised with top management in the upcoming weeks.
Only on Wednesday, Howai said a US$32 million loss was incurred on the Air Jamaica route. But top CAL officials, both present and former, yesterday told the T&T Guardian that the loss was expected, given that the Government was warned of the risk involved. It is all stated in a High-Level Business Appraisal of CAL. This report evaluated the financial standing of CAL and was submitted on June 22, 2010, to then Finance Minister Winston Dookeran, who took it to Cabinet. It was compiled by Conrad Aleong, former CEO of BWIA; former finance minister Selby Wilson; former vice-president of General Electric Capital Aviation Services Michael Dolsingh; and chartered accountant Krishna Boodhai. The report recommend against the Government entering into the CAL/Air Jamaica deal. In fact, Cabinet sources told T&T Guardian that Dookeran and others “were taken by surprise” by Prime Minister Kamla Persad-Bissessar’s July 2010 announcement at Jamaica House, Kingston, of the decision to honour the agreement on the US$30 million transition plan for CAL to acquire and operate six Air Jamaica aircraft.
Risks identified by the CAL appraisal team
• Regulatory risk: The Government of Jamaica still has to acquire the Jamaica route approvals from the United States Department of Transport, the Canadian Department of Transport and others. During the transition, the Government of Jamaica secured waivers of its existing bilateral agreements to permit CAL to operate on behalf of Air Jamaica. The current US waiver expired on July 14, 2010.
• Execution and assumption risks: CAL’s evaluation of the Jamaican routes and its contribution to CAL is premised on synergistic cost rationalisation to achieve savings of US$25.2 million and to increase revenues by 60 per cent by the end 2011. The present board of directors has stated that the execution of this integration plan requires a strengthened and focused implementation team. In addition, there is concern that a large portion of the estimated savings of US$15.2 million in respect of fleet renewal and maintenance may not be realisable.
• Market risk: Jamaica entered into an open-skies agreement with the US a few years ago. This means that any Jamaican or US carrier can fly to any destination in the respective countries. At the present time two low-cost carriers—Spirit Air and Jet Blue—maintain routes into Montego Bay and Kingston.