$21m top up keeps CAL flying
(CNS Business): Despite an increase in the output funding from government to Cayman Airways Limited (CAL) to ensure the national flag carrier can support tourism related and domestic routes, as well as a growth in general revenue in 2012, the airline still ended the year with a more than $4.3 million loss. Government boosted its output payments for tourism related gateways and to subsidize the Sister Islands flights from $10M in 2010 to $15M in 2011 and then almost $15.8M in 2012. Direct earnings also grew in 2012 to over $52.2M, up around $4.5M on the previous year. Nevertheless, it still ended the year with a deficit, which, added to the output payments, led to the airline sucking up $21 million in public cash.
Although the recent Ernst and Young report regarding the rationalization of the private sector has indicated that the airline should be pricing fares more accurately and moving towards charging travellers the correct price, the size of the sum injected into CAL from the public purse would suggest that pricing fairs accurately would make traveling on the airline prohibitively expensive for most people.
According to the latest report from the Office of the Auditor General regarding government authorities and companies, CALs $20m operating losses in 2012 were similar to those in the previous year but the audit office pointed out that increased revenue of more than $6.3 million in the year ending June 2012 were offset by expenses of some $5.6 million. In his report the public auditor makes it quite clear that CAL is entirely dependent on government to survive. With liabilities of more than $52.5M, the airline currently has assets of only $2.7 million.
In Alastair Swarbrick’s review of the airline’s situation, he wrote that CAL had serious difficulties paying creditors in 201 and at the end of that year owed nearly $27 million, with more than a third owed to the airport. It was overdrawn some $7.3 million and owed $9.4 million in loan payments.
Although Swarbrick gave the airline an unqualified opinion, when its accounts and annual report were audited he had highlighted the airline’s significant dependence on the public purse to keep flying. The auditor also found some serious management and governance issues relating to the IT environment and general controls. He said the airline has not conducted a risk assessment of this area of operations and there are multiple weaknesses that could result in significant errors in financial and other transactions.
Swarbrick pointed to the failure to formally document programming changes to information systems, no segregation of duties with staff given IT access, increasing the risk of fraudulent or unauthorised transactions, and the risk of inaccurate and unreliable data. He also raised concerns that, among a number of other internal weaknesses, three senior managers have ‘super user’ rights to the general ledger but the system does not record who inputs information, leading to a heightened potential for management to override controls.
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