The State will finance the retrenchment of 25 per cent of staff at Caribbean Airlines (CAL) at an estimated cost of $110 million.
This was revealed by Finance Minister Colm Imbert in the Senate yesterday after he was asked by Opposition Senator Wade Mark how the severance packages for the 450 employees would be financed.
On Monday, the airline announced it had suffered over $172 million in losses for the first quarter of 2021 and, in an effort to ensure a sustainable business model going forward, it would be retrenching up to 450 employees and cutting its fleet and routes.
Yesterday, Imbert said the airline was at the beginning of the consultation process for staff reduction and is finalising the exact number of personnel to be sent home.
“Caribbean Airlines does not have the required finances for the severance payments and therefore the severance payments will be financed by the Ministry of Finance,” Imbert said.
Asked by Mark the value of the severance packages, Imbert responded, “The estimate given to the Ministry of Finance at this time, which is subject to finalisation, is in the vicinity of $110 million.”
Mark also asked how the proposed retrenchment would affect CAL’s future operations.
Imbert said the airline had informed his ministry that passenger demands on its routes are forecasted to decrease in the short to medium term by both the International Air Transport Association (IATA) and CAL’s consultant, Amadeus.
He said he was told air traffic is forecasted to return to pre-COVID-19 levels by 2023. Imbert said with these predictions, CAL has decided to reduce its fleet and subsequently, its staff complement.
A variety of Caribbean Airlines (CAL) aircraft parked in hangers at the Piarco International Airport Monday.
He was asked for a breakdown of the reduction in the fleet and responded, “I am advised and I must say I am saddened by all of this ... This is not something that any of us would have wanted to see. I am advised that Caribbean Airlines is going to reduce its jet fleet to eight jet aircrafts and its turboprop fleet to five ATRs.”
That takes its fleet down from the current 16 (seven ATRs and nine Boeing 737 jets) to 13.
“Any separation of workers is directly as a consequence of the reduction in the fleet size and reduction in the routes.
“Notwithstanding reduced airline size, the routes will be operated at the highest level of safety and service,” Imbert said.
The minister said the company is putting in place support systems for any potentially affected workers. These include counselling services for them and their families, through the Employee Assistance Programme, outplacement services coordinated with the external recruiting agencies and Labour Ministry, transitional training regarding career guidance/support and financial management.
This is in addition to compensation packages employees will be entitled to upon separation.
Some international sites up to recently had described CAL as the largest airline in the Caribbean, employing 1,700 with 23 destinations, including some formerly operated by Air Jamaica.
According to data from CAL’s corporate communication manager Dionne Ligoure, the airline saw a massive reduction in passenger numbers from the two previous years.
Ligoure said in 2018, CAL transported 2,526,129 passengers. In 2019, that number increased slightly and the airline recorded 2,595,526 passengers.
In 2020, however, only 741,676 passengers were recorded.
Ligoure said the airline is still refining its strategic plan in relation to which routes will be cut and which will continue to be serviced.
She was unable to give any data about passenger travel by route, as she said it was competitively sensitive information.
Asked whether the retrenchment will be done before the mid-July timeframe announced by the Prime Minister for the reopening of the country’s borders, Ligoure said, “The consultations are taking place over the next two weeks to a month.”
Guardian Media Limited reached out to Trinidad and Tobago Airline Pilots Association (TTALPA) executive administrator Shelly Sadaphal, enquiring whether the union had met with the company yet to discuss the retrenchment.
Sadaphal said, “We are still awaiting communication from CAL on that.”
But Ligoure disputed this, telling GML, “I can go on record to confirm that the company contacted the union at 9.45. The detailed discussions will take place in the coming days and weeks.”
Caribbean Airlines CEO Garvin Medera.
GML also tried contacting Bustamante Industrial Trade Union (BITU) president general Kavan Gayle in Jamaica for comment on the retrenchment. BITU is said to be the union representing CAL employees based in Jamaica. Gayle read the messages sent via WhatsApp but up until press time, he had not responded.
Grim outlook for airlines globally
In the International Air Transport Association’s (IATA) Outlook for the global airline industry’s April 2021 update, the association forecasted a grim year ahead for airlines across the world, with losses of approximately US$47.7 billion in 2021.
This estimate was a massive reduction from the losses suffered in the first year of the COVID-19 pandemic, estimated to be US$126.4 billion.
The forecast said industry revenues are expected to total US$458 billion in 2021.
However, that amount is just 55 per cent of the $838 billion generated in 2019. In comparison, in 2020, the industry earned a meagre $372 billion.
In its forecast, IATA includes Trinidad and Tobago in its Latin America grouping.
In its breakdown of losses and profits for 2021, the IATA report gave the following outlook for Latin American carriers: “Latin American carriers are advantaged by having almost half (48%) of their RPKs (revenue passenger kilometres) being generated on domestic markets, in particular the large Brazilian home market. They are starting from relatively large losses in 2020 and, in some parts of the region, a slow rate of vaccination. Revenues from the growth in domestic travel are forecast to cut net losses by more than two-thirds this year—to -20.4% of revenues in 2021 from -80.1% in 2020.”
The report also states that Latin American airlines should benefit from large home markets but added that the outlook is ‘clouded” by the challenges of containing variants of the COVID-19 virus and slow rollouts of vaccination programmes.
Mariano Browne, Chief Executive Officer (CEO) of the Arthur Lok Jack Global School of Business.
Browne: Retrenchment overdue
Former Minister in the Ministry of Finance, Mariano Browne, says Caribbean Airline’s plans to restructure and cut staff are overdue.
In an interview with Guardian Media yesterday, Browne said CAL had been affected very badly by the shutdowns brought on by the pandemic.
He said although the airline’s fleet would have been grounded, it would still have been paying on its monthly leases to retain those aircraft.
With T&T’s borders closed since late March 2020, Browne said state-owned CAL got the short end of the stick.
“CAL, unfortunately, has been stuck, it is owned by Government so, therefore, it can’t contradict Government policies and it can’t put any pressure on the Government to change its policies, but there must be some kind of change in the policy,” he said.
He said the entire exemption process was “backward,” adding once the borders reopen, Government also needs to be clear on its quarantine policies.
He questioned what the entry policy would be like, asking whether those who are fully vaccinated will be required to quarantine upon entry.
Prime Minister Dr Keith Rowley, at a media conference on June 19, said incoming travellers will be dealt with in separate groups for those who are vaccinated and unvaccinated and the State’s criteria for entry will be determined by the Ministry of Health in the coming weeks.
Yesterday, Browne said, “All of those are things that have to be adjusted, there are examples of how this has been handled elsewhere in the Caribbean, in Barbados in particular, which has been very successful in how it has been managing. We have been quite backward in doing that and that is not CAL’s fault, that is the fault of the people who have to make the decisions, certainly in respect to national security and everything else that takes place in terms of the management of airport traffic.”
He said he believes CAL has done all it can at this time to stay afloat.